Unit I/ Topic 2

-Production Possibilities Curve (PPC)
                                        Frontier (PPF)
                                        Graph (PPG)
Graph (PPG)- shows alternatives ways to use economy resources.

4 Assumptions of a PPG
1. Two goods
2. Fixed resources (land,labor,capital's, entrepreneurship)
3.Fixed technology
4.Full employment of resources (all used equally)


Vocabulary
1. Efficiency- using resources in such a way to maximize production of goods and services.
2. Allocation Efficiency- products of being produced are the ones most desired by society.
3. Productive Efficiency- products are being produced in the least costly way, this is any point on the production possibility curve.
4. Under utilization-using fewer resources  than an economy is capable of using.





Here is an example of a Production Possibilities Curve, it is the same way we have learned in class just has 3 extra letters which all mean the same thing according to the key on this graph. In this case, A,B,C,D,E are all attainable and efficient. Letter F, is inside the curve, because it is attainable but inefficient and under utilization. Letter G, is on the outside of the curve, which is unattainable and would represent technology, and/or economic growth.


3 Types of Movement that Occur in a PPG
1. Inside the PPC
        - Occurs when resources or unemployed or underemployed (no productive efficiency)
2. Along the PPC
3.Shifts of the PPC


Types of shifts of the PPC (increasing and decreasing)

What causes the PPC/ PPF to shift?
1. Advance in technology
2. Change in resources
3. Change in the labor force
4. Economic growth
5. Natural disasters/war famine
6. More education and training (human capital)

Just a review over the PPG
*Inside the curve= attainable, but inefficient and under utilization
*On the curve= attainable, efficient
*Outside the curve attainable