ECON1101 - Production Possibilities Curve
Production Possibilities Curve (PPC)
A graph that has the maximum amount of good x at every amount of good y produced.
They illustrate the opportunity cost and the scarcity of resources.
They are, of course, simplified ; we assume there are only 2 products, rather than the 2349090658572205 of actuality.
Factors that shift the PPC (also the main factors in economic growth)
- Increasing productive Resources:
- Investment in new factories/equipment
- Population growth
- Improvements in knowledge and technology:
- Investment in education and ICT
- Gains from specialization
- Research
Opportunity Cost and the PPC
The gradient of the tangent at a point on the curve of the Production Possibilities Curve is the opportunity cost at that point. (The point you pick is based on the trading ratios).
(See figure 8.2).
page revision: 2, last edited: 26 Jul 2011 06:56
