This curve demonstrates the tradeoff of production possibilities between two products Y Axis X Axis Production Possibilities Curve Each point on the curve represents what is possible in the production of the two products Notice that the curve is inverse adding to one side means less of th ID: 508949
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Slide1
Production Possibilities Curve
This curve demonstrates the tradeoff of production possibilities between two products.
Y Axis
X AxisSlide2
Production Possibilities Curve
Each point on the curve represents what is possible in the production of the two products. Notice that the curve is inverse: adding to one side means less of the other
0
Computers
Stereos
Y Axis
X AxisSlide3
Production Possibilities Curve
The curve then represents the costs of producing a combination of these goods, so much of one and so much of another.
0
Computers
Stereos
A
B
Y Axis
X AxisSlide4
Production Possibilities Curve
The trade off occurs when we decide to produce more of one product ....
0
Computers
Stereos
A
B
Y Axis
X AxisSlide5
Production Possibilities Curve
... we lose the capability to produce as much of the other. When a curve is shaped such as this one is, it is said to be a “constant cost curve.”
0
Computers
Stereos
A
B
Y Axis
X AxisSlide6
What is the difference between a
Constant Costs Production Possibilities Curve and an Increasing Costs Curve? Slide7
Production Possibilities Curve
... but the increasing cost curve demonstrates an increasing amount of opportunity cost at certain ranges of the decision.
0
Computers
Stereos
A
Y Axis
X AxisSlide8
Production Possibilities Curve
... but the increasing cost curve demonstrates an increasing amount of opportunity cost at certain ranges of the decision. What is also demonstrated is the concept of “diminishing returns”
0
Computers
Stereos
A
B
Y Axis
X AxisSlide9
What does it mean to have a point
inside and outside
the PPC? Slide10
Production Possibilities Curve
Points A and B are attainable. In fact, resources are being used
efficiently
because to increase one or the other is to incur an opportunity cost
.
0
Computers
Stereos
A
B
Y Axis
X AxisSlide11
Production Possibilities Curve
Point C reflects an economy using its resources
inefficiently
because both commodities can be increased without incurring an opportunity cost .
0
Computers
Stereos
A
B
C
Y Axis
X AxisSlide12
Production Possibilities Curve
Point D reflects an impossible amount to achieve. There simply are not enough resources to produce at this point.
0
Computers
Stereos
A
B
C
D
Y Axis
X AxisSlide13
Is it possible to reach a point outside the PPC?
Yes it is! The
Factors of Production
would have to be increased. This would cause an increase (or movement) of the curve to expand into the frontier and encompass point D.Slide14
Production Possibilities Curve
An increase in the Factors of Production could move the curve ...
0
Computers
Stereos
A
B
D
Factors of Production (Land, Labor, Capital, Entrepreneurial Ability
Y Axis
X AxisSlide15
Production Possibilities Curve
0
Computers
Stereos
A
B
D
Increase
in the Factors of Production (Land, Labor, Capital, Entrepreneurial Ability
An increase in the Factors of Production could move the curve ... ...out to encompass the new level of production.
Y Axis
X Axis