EC 1
UCLA
Dr. Bresnock
Lecture 2
Production Possibilities Curve
(PPC) –
shows the maximum combinations of two
products that can be produced in a full employment, full production economy at a point in
time
.
The following assumptions apply when constructing a PPC:
1.
Full employment and productive (or technical) efficiency
2.
Fixed resources
3.
Fixed technology
4.
2 different goods – for simplicity
Ex.
Pizza or Robots
Production Alternatives
Type of Product
A
B
C
D
E
Pizza
0
1
2
3
4
Robots
10
9
7
4
0
The information given in the table will plot one
PPC given the above assumptions.
Graph 1
Production Possibilities Curve
As we move down
the PPC from Point A to Point E note the following:
Loss
Gain
From A
to
B
From B
to
C
From C
to
D
From D
to
E

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