Economics Grade 10 2020-09-27 Week3

The PPF continuation

The ppf is drawn downward sloping from left to right. This indicates it is only possible to produce
more of one good by giving up some units of the other good.

The ppf drawn in the example is bowed out or concave to the origin. This means as resources are
moved away from the production of wafer, more and more wafers must be forgone(given up) to
grow extra watermelons.
Meaning of points on the ppf
● Any point on the ppf represents efficient points or efficient use of resources.
Identify the efficient points in the example of the ppf drawn.

● Any point inside the ppf is an inefficient point or inefficient use of resources. This point also
indicates idle use of resources or unused resources.
NB: All points on the ppf and inside the ppf attainable points.
Identify the attainable points.

● Any point outside the ppf represents unattainable use of resources. Combination outside the
ppf cannot be possible with the given resources. Scarcity exist at any point outside the ppf.
Identify the point where scarcity exist.

Types of PPF
1. Increasing opportunity cost.

Good Y

Good X

The ppf is concave to the origin. This shape implies that as more resources are used in the
production of a particular good, the opportunity cost increases.
2. Constant opportunity cost

Good Y

Good X

The ppf is a straight line. This indicates equal amount of resources be given up as you produce
more of the other good.

3. Decreasing opportunity costs

Good Y

Good X
The ppf is convex to the origin. Moving down the curve from left to right resulting in increasing
returns or decreasing opportunity cost.

Shifting of the PPF

The ppf can either shift inwards or outwards. A shift of the ppf to the right or outwards indicate an
increase in the production of both goods.
Good Y
b

a Good
b
Diagram above shows an increase or a rightward shift in the ppf indicating an increase in the
production of both goods. The ppf aa increases or shift outwards to bb.

A Decrease in the ppf

Good Y
d

c d Good X

The diagram above shows a shift of the ppf to the left or inwards indicating a decrease in the
production of both goods. The ppf dd shift to the left or decreases to cc.

A pivot of the ppf

Good Y

Good X
There can also be a pivot in the ppf: This occurs if there is an improvement in a factor/variable that
benefits only one product.

Factors that will cause the ppf to shift

Outward shift Inward shift

● Improvement in technology ● Decrease in population size
● Increase in economic growth ● Poor weather conditions
● Increase in population size ● Natural disasters. (earthquake, flood,
etc..
● Good weather conditions ● Increase in crime rate
● Increased productivity ● Political instability
● Discovery of natural resources