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