Topic 1.6 : Production Possibilities Curve (PPC)

The Production Possibilities Curve (PPC)

Using Economic Models…

Step 1: Explain concept in words

Step 2: Use numbers as examples

Step 3: Generate graphs from numbers

Step 4: Make generalizations using graph

What is the Production Possibilities Curve?

A production possibilities graph (PPG) is a model that shows alternative ways that an economy can use its scarce resources

This model graphically demonstrates scarcity, trade-offs, opportunity costs, and efficiency.

Production Possibilities curve

4 Key Assumptions

• Only two goods can be produced

• Full employment of resources

• Fixed Resources (Ceteris Paribus)                                                                          
• New technology launched

Attainable and Unattainable combination

1. Attainable and efficient combination 

• Based on A,B,C,where resources fully utilized and the country is said to be at full economy level. 

    2. Attainable but not efficient combination

• Based on D the resources are not fully utilized( unemployment exist)

    3. Not attainable combination.

• Based on E ,not enough resources and no new technology

   4. extreme combination

• is where resources will use for produce only one goods

Change in production possibilities curve

-PPC Can increase or decrease due to the several factor

a. Increasing population :

• Manufactures will increase the volume goods when there is an increase in the population. production of both goods will increase. This cause the production possibilities curve shift to the right

b. Technology progress

• The factor can shift the ppc outward through an improvement in technology.