Introeconomics ppc-ppf

PREPWALK

1. Economics 1 Introduction to economics: PPC/PPF Short revision series

2. PPC/PPF 2 Production possibility curve/frontier

3. What is a PPF/PPC? 3 PPC stands for production possibility curve PPF stands for production possibility frontier. A PPC is a graph that shows different rates of production of two goods and services that an economy can produce efficiently during a specified period of time with a limited quantity of productive resources or factors of production.

4. Assumptions 4 Resources are used to produce either one or both of only two goods The quantities and quality of resources do not change Technology and production techniques do not change Resources are used in a technically efficient way.

5. Shapes of PPC vs. opportunity cost 5 Constant opportunity cost- straight line Increasing opportunity cost- concave to the origin Decreasing opportunity cost- convex to the origin

6. Now try to construct the following PPC’s 6 Full production Full utilization of resources Full employment Efficient utilization of resources Scarcity Attainable point Unattainable point Alternative options Choices Productive efficiency

7. 7 Increasing opportunity cost Decreasing opportunity cost Constant opportunity cost Unemployment Inefficient use of resources Wastage of resources Economic recession Economic depression Under utilization of resources

8. Shifts in PPC 8 Change in quality or quantity of FOP/P will result PPC to shift either leftward of rightward.

9. Now try to construct the following PPC’s 9 Economic growth Economic decline Increase in production capacity Civil war destructing the resources of the country Natural disaster Net out migration of skilled labour Increase in labour productivity

10. Now try to construct the following PPC’s – special cases 10 Present consumption Vs future production Present investment Vs future production Achieving an unattainable point with the help of international trade

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