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    Thiwanka Tissera
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    The Production Possibility Frontier (PPF) model shows the tradeoffs between producing two goods using limited resources. Points inside the curve represent inefficient production, while points on the curve are efficient. The opportunity cost of increasing car production by 3 units is 4 tonnes of grain, while the opportunity cost of increasing grain by 4 tonnes is 3 cars. An increase in resources or technology shifts the curve outward, while a decrease shifts it inward.

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    The Production Possibility Frontier (PPF) model shows the tradeoffs between producing two goods using limited resources. Points inside the curve represent inefficient production, while points on the curve are efficient. The opportunity cost of increasing car production by 3 units is 4 tonnes of grain, while the opportunity cost of increasing grain by 4 tonnes is 3 cars. An increase in resources or technology shifts the curve outward, while a decrease shifts it inward.

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    © All Rights Reserved
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    3 views1 page

    Untitled

    Uploaded by

    Thiwanka Tissera
    The Production Possibility Frontier (PPF) model shows the tradeoffs between producing two goods using limited resources. Points inside the curve represent inefficient production, while points on the curve are efficient. The opportunity cost of increasing car production by 3 units is 4 tonnes of grain, while the opportunity cost of increasing grain by 4 tonnes is 3 cars. An increase in resources or technology shifts the curve outward, while a decrease shifts it inward.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    The Production Possibility Frontier (PPF) model

    grain

    G G: cannot produce outside of the curve


    C C: efficient production point
    U U: inefficient production point

    cars

    grain

    12
    the opportunity cost of increasing car production by 3 = 4 tonnes of grain
    8

    24 27 cars

    grain

    12
    the opportunity cost of increasing grain production by 4 tonnes = 3 cars
    8

    24 27 cars

    An increase in quantity & quality of resources and an improvement in technology pushes the curve outwards:
    For both A and B for A only for B only

    A A A

    B B B

    A decrease in quantity & quality of resources pushes the curve inwards:

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