1.1.4 Production Possibility Frontiers
Production Possibility Frontiers The PPF shows the maximum output combinations an economy can achieve when all resources are fully and efficiently employed. Factor Mobility refers to the ability to move factors of production out of one production into another. Opportunity cost increases because not all our factor inputs can produce both goods equally a well. Most economies have some degree of specialisation, some of their factor inputs are more suited to a particular industry so factor immobility exists. If resources are moved to another industry then they are done so at an increasing opportunity cost. A PPF will shift outwards if there is an increase in the quality or quantity of resources. PPFs can also shift inwards if there are wars, natural disasters or epidemics. This shows constant opportunity cost Economic growth - an increase in the real or potential output, this is shown by an outward shift in the PPF. Factor Immobility - occurs when it is difficult for fact...