Tuesday, January 28, 2014

Production possibilities

Production possibilities
*only two goods can be produced

  • PPG Graph- shows alternate ways to use resources
  • PPC Curve
  • PPF Frontier- illustrates opportunity cost 
Point A- attainable to get to the curve, War, Famine, Unemployment
                                                       Point B,D,C attainable & efficient 
                                                       Point X unattainable- things to change it: Technology and Economic growth

Productive efficiency- any point of the curve

Law of Increasing Opportunity Cost - when resources are shifted from making one good or service to another the cost of proceeding the second item increases
 *this occurs because not all resources are equally suited from the production of all goods.
To move up from unattainable:




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