Ppf - inside the curve is inefficient and hence not...

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P.P.F. (Production Possibility Frontier) It is strictly based on the information given by the schedule. The units of X have been measured along the horizontal (x) axis and those of Y along the vertical (y) axis. The six points ’a’ to ’f’ are then the result of mapping out the values of varying combinations of the two goods in the schedule. On joining these points we obtain a continuous curve which is known as the P.P.F. curve , since each point on the P.P.F. represents maximum producible units of X and Y with the given quantities of resources. It is also known as a transformation curve since the resources are transformed into varying units of the two goods. Note that all points on the P.P.F. are efficient , in the sense, all available resources have been utilized fully and efficiently. Any point such as ’g’
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Unformatted text preview: inside the curve is inefficient and hence not desirable (though possible). At such a point, units of one or both the goods are produced in smaller quantities than what is otherwise possible. Hence the resources are either utilized inefficiently or wastefully. On the other hand, any point outside the curve such as H is not attainable (though desirable) with the given amount of resources. Hence the only points, both desirable and possible, occur along the P.P.F. curve. The curve slopes downwards and bulges outwards. Such a shape satisfies the two properties (the Y units diminishing as the X units increase, and an increasing rate of sacrificing Y units) manifested by the P.P.F. Schedule. Such a curve is called strictly concave to the point of origin ....
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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