Professional Documents
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PPF PPT Gclassroom
PPF PPT Gclassroom
Competitive supply
Factor inputs can be used
to produce different
products
Output of beef
Production Output of
possibility wheat
curve
(frontier)
introduction
PPC1
Output of beef
Production Output of
wheat
possibility
curve
introduction
curve
introduction
A
W1
B1 Output of
Production Output of
wheat
Steep PPC
Means you are sacrificing a lot of
possibility wheat for only a little extra beef.
curve
introduction
A
W1
B1 B2 Output of beef
Production Output of Opportunity cost = lost
wheat output of wheat / gained
possibility output of beef
curve = W2W1 / B2B1
introduction
A
W1
B1 B2 Output of beef
Production Output of Opportunity cost = lost
wheat output of wheat / gained
possibility output of beef
curve = -60/10 = 6 units of wheat
for each extra unit of beef
introduction
A
200
80 90 Output of beef
EXPLAINING THE CONCAVE SHAPE OF THE PPF
The shape of a PPF is commonly drawn as an arc that is concave to the
origin
If the law of diminishing returns holds true, then the opportunity cost of
expanding output of X measured in terms of lost units of Y is increasing.
Resources such as land, capital and labour used in producing wheat might
not be equally suited to producing beef
B B2 Beef
Output of
wheat
Shifts in the
Production
Possibility Curve
B Beef
Output of
wheat
Shifts in the
Production
Possibility Curve D
Shifts in the
Production D
Possibility Curve
B Beef
OVERVIEW OF KEY CAUSES OF PPF SHIFTING OUT
Cause of an outward shift in the PPC Comment on the cause of the shift in the PPC
• Higher productivity / efficiency of This increases the output per unit of an input
factor inputs used in production
Improved management reduces waste and
• Better management of factor inputs improves product quality
• Increase in the stock of capital and From inward labour migration / increased capital
labour supply investment