1.4 Production Possibility Curves (Cambridge (CIE) IGCSE Economics)

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  • Define the term production possibility curve.

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  • Define the term production possibility curve.

    A production possibility curve is an economic model that considers the maximum possible production (output) that a country can generate if it uses all of its factors of production to produce only two goods or services.

  • What does the term capital goods mean?

    Capital goods are assets that help a firm or nation produce output (manufacturing), e.g. a robotic arm in a car manufacturing company.

  • What are consumer goods?

    Consumer goods are end products and have no future productive use, e.g. a watch.

  • True or False?

    Producing at any point on the production possibility curve represents productive efficiency.

    True.

    Producing at any point on the production possibility curve represents productive efficiency.

  • Define the term opportunity cost.

    Opportunity cost is the loss of the next best alternative when making a decision.

  • How is economic growth illustrated on a production possibility curve?

    Economic growth occurs when there is an increase in the productive potential of an economy, illustrated by an outward shift of the entire production possibility curve.

  • Define the term factors of production.

    Factors of production are the resources (land, labour, capital, and enterprise) used to produce goods and services.

  • What does an inward shift of the production possibility curve represent?

    An inward shift of the production possibility curve represents economic decline.

  • True or False?

    Any point outside the production possibility curve is attainable.

    False.

    Any point outside the production possibility curve is unattainable.

  • Define the term economic decline.

    Economic decline occurs when there is any impact on an economy that reduces the quantity or quality of the factors of production.