PPC Graphs

Factors of Production: resources required to produce goods and services

1. Land (natural resources)
2. Labor (work force)
3. Capital (physical/ human)
4. Entrepreneurship (innovative/ risk-taker)

Trade-off: alternatives that we give up whenever we choose one course of action over another

Opportunity cost: form of a trade-off; the next best alternative

Production Possibilities Curve/Graph/ Frontier (PPC/G/F)

shows the trade-offs of a society based on technology and resources

There are 4 Assumptions of a PPC:

1. there are 2 goods
2. fixed resources
3. fixed technology
4. full employment or resources

1. Efficiency: using resources in such a way to maximize the production of goods and services.
2. Allocative efficiency: the products being produced are the ones that are most desired by society.
3. Productive efficiency: products are being produced in the least costly way and this is any point on the (PPC).
4. Underutilization: using fewer resources than the economy is capable of using.

Three types of movement that occur within the (PPC):

1. Inside the (PPC)- occurs when resources are unemployed or underemployed(means we have no productive efficiency)
2. Along the (PPC)-can move in both directions
3. Shifts of the (PPC)- 

Increase:

Decrease:

*What causes the (PPC) to shift?

1. Due to technological change

2. Change in resources

3. Economic growth

4. Change in the labor force

5. Natural disasters/ war/ famine

6. More education (human capital)

Inside the curve->underutilization, attainable/inefficient

On the curve->attainable/ efficient

Outside the curve-> unattainable w/ current resources