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What is meant by zero factor substitution?
Factors of production can only make one type of good or the other.
What will the PPF look like with zero factor substitution?
A box
Define productivity.
Productivity = Output per Input
How is Productive Efficiency represented using a PPF?
Any point on the boundary of the PPF is Productively Efficient.
Factors of Production: What is Land?
Land refers to the space that is used for buildings, as well as any primary materials that may be extracted from nature
What will cause a pivot in the PPF (change in one axis)?
Any event which changes the factors of production for one good, and not the other. e.g. an invention for one industry
What was Adam’s Smith suggestion for how a government should allocate resources?
Let the people get on with it. By trading, they will sort it out.
What will the PPF look like with imperfect factor substitution?
A curve, concave to the origin
Why does specialisation require a means of exchange (i.e. the use of money)?
Because workers produce a narrower range of output and they would not be able to barter. Money is required to avoid the double coincidence of wants.
What will shift the PPF in (both axes)?
Any event which decreases the factors of production or their efficiency. e.g. hurricane, war, restrictive immigration policy
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