PPF - Production Possibilities We can use the idea of a...

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Production Possibilities We can use the idea of a Production Possibilities Frontier  to illustrate several ideas already discussed: scarcity, opportunity cost,  and choice growth efficiency
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guns butter Production Possibilities Frontier:  A curve  showing alternative combinations of goods  that can be produced when available  resources are used efficiently.
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Production Possibilities Consumption Good Capital Good 600 0 575 100 525 200 450 300 350 400 225 500 0 600
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Production Possibilities Frontier 0 50 100 150 200 250 300 350 400 450 500 550 600 650 0 100 200 300 400 500 600 Capital Consumption
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The slope of the PPF has an important economic interpretation: It is the cost of the good on the “x”-axis . That is, the slope tells us how much of the good on the “y”-axis must be given up to produce a unit of good “x.”
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Consumption Good Capital Good Cost of Capital Good 600 0 NA 575 100 25 Consumption 525 200 50 Consumption 450 300 75 Consumption 350 400 100 Consumption 225 500 125 Consumption 0 600 225 Consumption
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This note was uploaded on 04/07/2008 for the course ECO 210 taught by Professor Sun during the Fall '08 term at Grand Valley State University.

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PPF - Production Possibilities We can use the idea of a...

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