Date post: | 29-Nov-2014 |
Category: |
Documents |
Upload: | jeremy-engelke |
View: | 115 times |
Download: | 0 times |
The Production Possibilities Curve
(PPC) a graph which shows various combinations of goods
and services that can be produced.
The PPC show us the trade offs that are possible due to limited
resources.6 Guns and0 Cases of butter
2 Guns and7 Cases of butter
0 Guns and11 Cases of butter
Movement along the PPC shows opportunity cost.
5 Guns and2 Cases of butter
2 Guns and7 Cases of butter
The points along the PPC curve assume that all resources are
being fully employed.
A
B
Any area inside the PPC underutilizes resources.
A
C B
Any area outside the PPC is impossible to sustain due to
insufficient resources.
A
C B
D
The PPC is also called the Production Possibilities Frontier
because it demonstrates the maximum products that can be
produced.
If there is a change in resources or in productivity, the entire PPC
moves.
Economist use the PPC to perform a cost-benefit analysis:
comparing the cost associated with an action to its benefits.
Wealth is generated by the circular flow of economic activity.
Mullet
In the Forum:
• What product markets do you participate in?
• What factor markets do you participate in?