Unit 1, Subject 2 AP ECO

MOVEMENTS OF THE PPG
1. Inside the curve
-any point inside, point A

-possible reasons to be inside curve: depression, recession, underemployment, famine, war, natural disaster
-underemployment can be caused because: not enough resources or not enough employees. you can stuff get it done but not efficiently
2. Along the Curve
-ratio of productions of 2 different products causes shifts along the curve

3. Shifts of the Curve

-you can shift inward and outward
-2 causes to go outward: technology and economic growth


OPPORTUNITY COST: The next best alternative that you must give up in order to get what you want, a "trade-off". ex: study to get a good grade on a quiz

LAW OF INCREASING OPPORTUNITY COST
-as you produce more of one good, the opportunity cost (foregone production of another good will increase)
-more of one = less of another

CONCAVE VS. CONSTANT PPG
-concave: bowed out

constant: the same, straight line

PRODUCTIVE EFFICIENCY VS. ALLOCATIVE EFFICIENCY
productive: products are being produced in the least costly way

-all points are efficient
Allocative: products being produced are the ones that are most desired by society


-can be at point A because of delays
-point D to wait for a product (unattainable)

PPG (PPG OR PPC) : Production possibility graph
-in PPC the c is for curve
-alternate ways to use resources
-each point on the graph reflects a trade off
-shows the most that society can produce if it uses every available resource to the best of its ability


KEY ASSUMPTIONS
1. Full employment
-reasons americans are not fully employed is that americans are lazy, retired and disabled people.
-would look like 80 to 90% factory capacity.
-would look like 4 to 5% employment
2. Productive efficiency
3. Fixed resources: land, labor and capital.
4. Fixed state of technology
5. No international trade
6. Goods produced

PPG
-1st product is y axis
-2nd product x axis
-points can be any title, 3 points on a PPG

POINT A
-attainable but inefficient (ex: slow business)
-under utilization
-unemployment may be existing and underemployment
-could have a war, famine or depression/recession... (recession most likely)
-inside of curve

POINT B
-attainable and efficient
-halfway between production of both products equally but point may be lower if you produce one product more than another (specialize in one product)
-point is ON curve no matter what

POINT C
-unattainable, can be due to technology or economic growth can cause you to be OUTSIDE of the curve
-not available to be sold purchased or use, not there yet because of todays resources but in the future