Production possibilities curve An introduction Abstractions and Assumptions

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 Productive efficiency: Resources are employed in the least costly way

What type of curve illustrates the label below? Increasing opportunity cost per unit of good B

What type of curve illustrates the label below? Increasing opportunity cost per unit of good B

What type of curve illustrates the label below? Zero opportunity cost per unit of good B

What type of curve illustrates the label below? Zero opportunity cost per unit of good B improbable

What type of curve illustrates the label below? Constant opportunity cost per unit of good B

What type of curve illustrates the label below? Constant opportunity cost per unit of good B

What type of curve illustrates the label below? Decreasing opportunity cost per unit of good B

What type of curve illustrates the label below? Decreasing opportunity cost per unit of good B Impossible; not supported by economic theory

• 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?

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