Micro Topic 1c Production possibility curves

Definition: The PPC shows how much can be produced using all possible resources in the economy.

Assumptions when drawing a PPB:

• 2 goods are being produced
• current factors of production
• productivity= output per f.op per hour
• technology is fixed (c.p)

STRAIGHT LINE=Constant opportunity cost (what you give up is equal to what you gain on any point of the curve).

CURVED LINE= The f.o.p are not equally suited to produce each output. As output of one good/service is increased, more resources have to be sacrificed for production. Opportunity cost increases.

• If a point lies within a PPF, then resources are being employed inefficiently. Total output…