Production Possibilities Frontier

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# Production Possibilities Frontier - PowerPoint PPT Presentation

Production Possibilities Frontier. Consumer Goods. Production Possibilities Frontier (PPF) shows all possible combinations of two products (Consumer Goods and Capital Goods) that a country can produce with available technology and full employment of all resources. PPF. 0. Capital Goods.

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## PowerPoint Slideshow about 'Production Possibilities Frontier' - Michelle

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Presentation Transcript
Production Possibilities Frontier

Consumer Goods

Production Possibilities Frontier (PPF) shows all possible combinations of two products (Consumer Goods and Capital Goods) that a country can produce with available technology and full employment of all resources.

PPF

0

Capital Goods

A Production Possibility Frontier

Suppose that the production possibility frontier can be represented by

To find the slope, we can solve for Y

If we differentiate

A Production Possibility Frontier

When X=5, Y=13.2, the slope= -2(5)/13.2= -.76

When X=10, Y=5, the slope= -2(10)/5= -4

The slope rises as X rises.

### Indifference Curves

An Indifference Curve represents all combinations of market baskets that provide a consumer with the same level of satisfaction.

Characteristics of Indifference Curves
• Indifference curves are continuous and every- where dense;
• Indifference curves slope downward to the right; and
• Indifference curves do not intersect;

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U2

U1

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