Post on 08-Mar-2016
description
transcript
Production Possibility Frontier
Brought to you by EcotutsFor more presentations, visit www.ecotuts.com
Copyright - Ecotuts 2010
Project Head: Pradeepthi BommidalaGraphs and Figures Designed By: Govind Bommidala
Definition
Production possibility frontier is a curve showing the maximum combinations of goods or services that can be produced in given period with available resources.
Production possibility frontier can also be referred to as Production Possibility Curve (PPC), Production Possibility Boundary (PPB), Transformation Curve or Opportunity Cost Curve.
ecotuts.comCopyright - Ecotuts 2010
Production Possibility Frontier
At point A, all of the resources are devoted to the production of
non-manufacturing goods.
At point D, all resources are devoted to the production of
manufactured goods.
At point E, the economy is not using it’s resources efficiently
and point F is unattainable with the available resources.
ecotuts.com
C
B
F
E
o
A
DNo
n-M
anuf
actu
red
Good
sManufactured Goods
Copyright - Ecotuts 2010
Figure 1
Shifts in Production Possibility Frontier
O
B
Q
QP
P
A
P
Non-
Man
ufac
turing
Goo
ds
Manufacturing Goods
ecotuts.com
The PPF shifts from PP to QQCopyright - Ecotuts 2010
Figure 2
Causes for shifts in PPF
there is an increase in the quantity of resources available for production. (Eg: Increase in the workforce or the number of new factories).
there is an increase in the quality of resources. (Eg: Educated workers, technological advancements etc.)
An increase in the productive potential of an economy is shown by a rightward shift on the production possibility frontier.
The PPF shifts rightwards when:
The PPF shifts leftwards when:
the economy loses it’s efficiency due to natural disasters or famines etc..
ecotuts.comCopyright - Ecotuts 2010
This Presentation is Bought to You By
Ecotuts Economics TutorialsAll rights reserved, Ecotuts 2010
Do not copy or reproduce the above material.
CREDITSProject head: Pradeepthi Bommidala
Graphs and models: Govindu Bommidala
Requests, suggestions and comments are most welcome. Write to us at: pradeepthi@live.com
For more presentations, visit us at www.ecotuts.com
WANNA CONTACT?