Chapter 2

Chapter 2 - Chapter 2: The Production Possibility Frontier...

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Chapter 2: The Production Possibility Frontier Production Possibility Frontier (PPF) Assuming limited resources are aligned in such a way that goods may be produce, there must as well be limits to what ca be produced In analyzing such limits and trade-offs, the PPF is a tool for comparing the production of two goods PPF—Conditions of the Model 1.) Only 2 “Goods” in question The trade-off of production, the give and take of choosing one versus another is the dominant theme These may be representative goods o Coke or Potato Chips—literal goods o Guns or Butter- classic example of defense versus domestic spending—representative goods 2.) Fixed time duration The PPF addresses production capability as it exists during a specific timeframe Why is this important? Because what may or may not be possible later is not the issue. What can be done now it what’s important 3.) Possible Production given the available technology and using fully employed resources Again, maxing out the possible level of production, the point is, what can be produced
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This note was uploaded on 11/03/2009 for the course ECON 2000 taught by Professor Roussell during the Fall '06 term at LSU.

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Chapter 2 - Chapter 2: The Production Possibility Frontier...

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