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PPF - Growth Analysis definitions

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  • Production Possibilities Frontier
    A curve illustrating the maximum combinations of capital and consumer goods an economy can produce with available resources.
  • Economic Growth
    An outward shift of the curve, reflecting increased capacity to produce goods and services in an economy.
  • Capital Goods
    Items like factories and machinery used to produce other goods, contributing to future productivity.
  • Consumer Goods
    Products intended for direct use by households, such as food or clothing.
  • Natural Resources
    Inputs from the environment, such as oil or minerals, that can expand production potential when increased.
  • Human Resources
    The labor force, whose education and productivity levels influence an economy’s output capacity.
  • Potential GDP
    The highest output level an economy can sustain using all resources efficiently.
  • Supply Factors
    Elements like resource availability, capital, and technology that expand an economy’s productive capacity.
  • Demand Factors
    Household, business, and government purchases that must keep pace with increased output to avoid excess inventory.
  • Productive Efficiency
    Resource use that minimizes cost, ensuring maximum output from given inputs.
  • Allocative Efficiency
    Resource allocation that matches production with what citizens most desire, maximizing societal well-being.
  • Technology
    Advancements that make capital and labor more productive, enabling higher output with the same resources.
  • Inventory
    Unsold goods that accumulate when production exceeds demand, signaling underutilized capacity.