Econ 2 Files
Econ 2 Lecture
Notes
Lecture 3: Production Possibilities Curve
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Economics 2 |
Lecture 3: Production Possibilities Curve
production possibilities curve
Production Possibilities Curve
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- What it shows: the maximum combinations of two goods an economy can produce with its existing resources and technology; an economy can produce at points on or inside its PPF but points outside the curve are unattainable
- full employment: points inside the PPC are inefficient and represent large scale unemployment because the economy could produce more of both goods while points on the PPC are efficient and consistent with full-employment of resources
- Shape: the PPC is concave or bowed out away from the origin because of increasing opportunity costs resulting from specialized resources (resources are not equally suited to producing all products)
Opportunity costs are equal to the amount given up divided by the amount gained.
Widgets Whajamas Opportunity Cost of Producing Whajamas 18 0 - 15 13 3/13 11 14 4 0 23 11/9
- Shifts: the PPC will shift outwards reflecting an increased capability to produce goods and services when (1) there are increases in the quantity of resources or (2) if there is technological improvement
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David A. Latzko Business and Economics Division Pennsylvania State University, York Campus office: 13 Main Classroom Building phone: (717) 771-4115 fax: (717) 771-4062 e-mail: 
web: www.yk.psu.edu/~dxl31 |
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