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Production possibilities curve. An introduction. Abstractions and Assumptions of a PPC. Compare 2 variables; goods or services Trade-offs or opportunity cost involved All available resources are fully employed All available technology is fully employed

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abstractions and assumptions of a ppc
Abstractions and Assumptions of a PPC
  • Compare 2 variables; goods or services
  • Trade-offs or opportunity cost involved
  • All available resources are fully employed
  • All available technology is fully employed
  • Productive efficiency: Resources are employed in the least costly way
what type of curve illustrates the label below7
Decreasing opportunity cost

per unit of good B

What type of curve illustrates the label below?

Impossible; not supported by economic theory

Good B

Good A

slide11
What trade-offs are involved?

Why is the PPC concave?

What does point (E), inside the PPC illustrate?

What is the significance of point (F), outside the PPC?

Under what conditions can point F be reached?

A

12

F

B

10

8

army trucks

6

C

E

4

2

D

0

1

2

3

cars

slide12

H

F

G

A

Moving from point B to point A, could eventually expand the frontier from G,G to H,H

B

capital goods

C

E

D

0

H

G

consumer goods