Production Possibility Curves

A description of how to draw and use a PPC diagram

Category:

Education

Tags:

• Economics
• Production Possibility Curve
• AS level economics
• A level economics
• microeconomics

[BrynJonesOnline]

Nickorido: Yes, that is exactly right. A linear PPC means the opportunity cost of increasing the output of one good is constant as you always have to give up the same amount of the other good. Bryn

[jiro1026]

Is the concept of "production possibility curves" the same as "changes in demand" and "changes in quantity demand"?

[BrynJonesOnline]

No: The PPC shows the maximum combinations of output an economy can produce and a movement along a PPC shows the opportunity cost (in terms of what you give up) in order to gain something else.

The demand curve links quantity demanded by consumers to changes in price. The axes are labelled differently. A change in quantity demanded happens when the price changes;a change in demand occurs when any other factor that effects demand changes( disp inc, taste&fashion, adverts, price of comp/subs)

[africasgateway]

Thanks that was a really good explanation. Please do more. E.g. how about marginal utility and total utility?

[BrynJonesOnline]

There are more on their way over the next few days, but nothing on utility as we don't teac it anymore

[JUDSON777733]

Spot on!!! Excellent staff, the best explanation ever!!! Thanks for share your skill and your valuable time!! Thanks for posting this.. it really is the best explanation ever.

[harishdoc]

@ BrynJonesOnline Awesome, thanks a ton. Merry Christmas :-)

[luistpuig]

Productivity is a result of Efficiency, and not energy efficiency like some are talking right now, but COMPLETE Efficiency...if you don't know the Baselines of your business how can you improve it?... if your Equipment isn't kept and operated properly how can you depend on it?...if your organization has no effective worker’s communication & training how can you get people to do the right things?...get it? Process, Equipment, Personnel, the core elements... get the Industrial Efficiency Triangle.

[82ark]

thanks that was good

please upload more

[frewenw]

I recommend that the production of one good given up to increase the production of the other good is better explained as 'trade-off' cost, which can be constant, increasing or decreasing depending on the shape of the curve. It is important that the concept of opportunity does not waver from that important idea of next best alternative forgone.

[frewenw]

You may agree or disagree with my comment but it is good discussion...

It is important to emphasise that opportunity cost refers to the next best alternative forgone, so in your explanation you have to have a number of different combinations that are ranked in order of preference and when a choice is made about which combination of the two goods to produce, the opportunity cost is the next best alternative that wasn't chosen (forgone).

[maddecent08]

great i get it! thanks!!

[Nickorido]

If the PPC is linear, does this not mean that there is no increasing opportunity cost?

[zbalder14]

at :44 it would be (F,0) not (0,F)