The production possibility curve

The production possibility curve (PPC) illustrates scarcity, choice and opportunity cost. It simplifies the concept of how an economy can produce things using only two goods as an example. Suppose there are only two goods produced in the economy. The PPC shows all the different combinations of the two goods that can be produced in the economy when resources are fully and efficiently employed, given the state of the technology. It is an important tool in economics that illustrates the concepts of scarcity, choice, and opportunity cost. It is also refered as the Transformation Curve. It can be defined as a locus of all possible combinations of two goods Y and X that an economy can produce using all resources with maximum efficiency. Rarely does a country produce at either of these extremes. Instead, countries typically produce at a point somewhere along the PPF. The PPF is based on the following underlying assumptions;
1. Resources are used to maximise capacity.
2. Resources are scarce.
3. Technology remains completely constant.
4. All points along the PPC boundary are Pareto Efficient. Pareto Efficient entails that it is not possible to increase the production of one commodity without necessarily reducing the production of the other.
5. If resources are devoted to the production of good Y, the economy will be at intercept of the curve with the vertical axis where there is YO and zero good X and vice versa.
6. If the economy chooses to produce both goods then any choice along the PPC is possible.
7. Points above the PPC are desirable but unattainable given the current pool of economy’s resources
8. Points below or inside the PPC represent inefficient points. These points can also denote idle resources.
9. The PPC is concave to the origin. The concavity represents that resources are not perfectly occupationally mobile. Resources are not equally suited to all types of production.
Scarcity
Scarcity is illustrated by point a which lies outside the production possibility curve. We would like to produce that amount of Y and X but it is not possible given our existing resources and efficiencies. To reach point a, an increase in resources and/or an increase in efficiency of production are needed.

The PPC has a negatively slopped boundary showing the combinations that are just attainable when all the society’s resources are efficiently employed. Scarcity is defined by the unattainable combinations beyond the boundary of the production frontier. The PPC is a visual model of scarcity and efficiency. It simplifies the concept of how an economy produce goods’.

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Scarcity is illustrated by point F which lies outside the production possibility curve. It is desirable to produce more of good Yand X but it is not possible given the available resources and efficiencies’. Point G indicates inefficiency. It is possible to produce more of both goods by being on the transformational frontier. Economy desires that society allocates resources to their best use. Resource allocation in many economies is performed by market forces. Consumers indicate their preferences by purchasing goods and services. Producers desire to satisfy the consumer demands through using scarce resources to produce goods and services that consumers demand. This is how the society decides who gets what. It is how scarce resources are allocated and distributed efficiently in our economy
Choice arises from scarcity and inherent limitations in resources endowments. Analysis focuses on individual choice. Concept assumes that people are rational though there are irrational consumers who are affected by addiction, habits and at times idol worshiping.
.As illustrated by the diagram below the points A indicates an efficient in production. Outside the curve shows increase in production but however it is unattainable. The point inside the curve B represents magnitude of inefficiency. Because of scarcity, choices must be made by consumers, businesses and governments. For example, over one million people travel into Harare each day and they make decisions about when to travel, whether to use the bus, the tube, to walk or cycle or work from home. Millions of decisions are taken, many of them are habitual – but somehow on most days, people get to work on time and they get home too in safety if not in comfort. We are always uncovering of new wants and needs which producers attempt to supply by using factors of production.

Y1

Y2

X1 X2

The PPC illustrates how a nation should allocate resources between various possible kinds of production. Where to locate on the PPC boundary is graphical representation of how this key question may be answered. Each point on the boundary indicates specific combinations of the possible output. At point A, the nation is able to produce X1 goods and Y1 goods. A move further down the PPC to point B represents another choice a nation can take where it can produce X2 goods and Y2 goods. Choice is reflected by the need for society to choose among the series of points on the PPC such as point A and point B. The PPC is a series of points of efficiently attainable outputs.

According to (Mabry-Uibirch,1994; Hyman,19991), the opportunity cost of using a resource is the value of the second best alternative forgone when using the resource for the best option. The cost of choosing to use a resource for one purpose is measured by the sacrifice of the best next alternative for using the resource. Opportunity cost looks into how individuals and businesses weigh different options. It is as a measure of costs expressed as alternatives given up. Opportunity cost is shown by the negative slope of the PPC boundary. As the nation moves along the boundary, more of one type of a good is being obtained at the cost of fewer of the other type. The steep of the slope of the PPC gets steeper as one moves from the left to the right expressing increasing opportunity cost as more and more of a good is given up for each individual unit of the other good. It can be represented by the equation;

Opportunity cost =return on the best option chosen -return on the option chosen.

X2
x
When a choice is made , an opportunity cost is incurred.in other words when a nation chooses what goods to produce it is forgoing produce other goods hence opportunity cost is the cost forgone. Moving from point C to point D on the diagram implies producing an additional amount of good X indicated by change A in the figure, at an opportunity cost of reduction in good Y indicated by change B. opportunity cost is given by the slope of the PPC and it tells us how much of one good we have to give up in order to produce one more unit of the other.

In conclusion the PPC reflects scarcity, choice and opportunity cost. Although points on and inside the PPPC are attainable poits outside are desirable but unattainable. Scarcity is reflected by the unattainable points that lie outside the PPC. Choice is reflected by the need for a nation to choose among the series of points on the PPC. the

The production possibility curve (PPC) illustrates scarcity, choice and opportunity cost. It simplifies the concept of how an economy can produce things using only two goods as an example. Suppose there are only two goods produced in the economy. The PPC shows all the different combinations of the two goods that can be produced in the economy when resources are fully and efficiently employed, given the state of the technology. It is an important tool in economics that illustrates the concepts of scarcity, choice, and opportunity cost. It is also refered as the Transformation Curve. It can be defined as a locus of all possible combinations of two goods Y and X that an economy can produce using all resources with maximum efficiency. Rarely does a country produce at either of these extremes. Instead, countries typically produce at a point somewhere along the PPF. The PPF is based on the following underlying assumptions;
1. Resources are used to maximise capacity.
2. Resources are scarce.
3. Technology remains completely constant.
4. All points along the PPC boundary are Pareto Efficient. Pareto Efficient entails that it is not possible to increase the production of one commodity without necessarily reducing the production of the other.
5. If resources are devoted to the production of good Y, the economy will be at intercept of the curve with the vertical axis where there is YO and zero good X and vice versa.
6. If the economy chooses to produce both goods then any choice along the PPC is possible.
7. Points above the PPC are desirable but unattainable given the current pool of economy’s resources
8. Points below or inside the PPC represent inefficient points. These points can also denote idle resources.
9. The PPC is concave to the origin. The concavity represents that resources are not perfectly occupationally mobile. Resources are not equally suited to all types of production.
Scarcity
Scarcity is illustrated by point a which lies outside the production possibility curve. We would like to produce that amount of Y and X but it is not possible given our existing resources and efficiencies. To reach point a, an increase in resources and/or an increase in efficiency of production are needed.

The PPC has a negatively slopped boundary showing the combinations that are just attainable when all the society’s resources are efficiently employed. Scarcity is defined by the unattainable combinations beyond the boundary of the production frontier. The PPC is a visual model of scarcity and efficiency. It simplifies the concept of how an economy produce goods’.

Scarcity is illustrated by point F which lies outside the production possibility curve. It is desirable to produce more of good Yand X but it is not possible given the available resources and efficiencies’. Point G indicates inefficiency. It is possible to produce more of both goods by being on the transformational frontier. Economy desires that society allocates resources to their best use. Resource allocation in many economies is performed by market forces. Consumers indicate their preferences by purchasing goods and services. Producers desire to satisfy the consumer demands through using scarce resources to produce goods and services that consumers demand. This is how the society decides who gets what. It is how scarce resources are allocated and distributed efficiently in our economy
Choice arises from scarcity and inherent limitations in resources endowments. Analysis focuses on individual choice. Concept assumes that people are rational though there are irrational consumers who are affected by addiction, habits and at times idol worshiping.
.As illustrated by the diagram below the points A indicates an efficient in production. Outside the curve shows increase in production but however it is unattainable. The point inside the curve B represents magnitude of inefficiency. Because of scarcity, choices must be made by consumers, businesses and governments. For example, over one million people travel into Harare each day and they make decisions about when to travel, whether to use the bus, the tube, to walk or cycle or work from home. Millions of decisions are taken, many of them are habitual – but somehow on most days, people get to work on time and they get home too in safety if not in comfort. We are always uncovering of new wants and needs which producers attempt to supply by using factors of production.

Y1

Y2

X1 X2

The PPC illustrates how a nation should allocate resources between various possible kinds of production. Where to locate on the PPC boundary is graphical representation of how this key question may be answered. Each point on the boundary indicates specific combinations of the possible output. At point A, the nation is able to produce X1 goods and Y1 goods. A move further down the PPC to point B represents another choice a nation can take where it can produce X2 goods and Y2 goods. Choice is reflected by the need for society to choose among the series of points on the PPC such as point A and point B. The PPC is a series of points of efficiently attainable outputs.

According to (Mabry-Uibirch,1994; Hyman,19991), the opportunity cost of using a resource is the value of the second best alternative forgone when using the resource for the best option. The cost of choosing to use a resource for one purpose is measured by the sacrifice of the best next alternative for using the resource. Opportunity cost looks into how individuals and businesses weigh different options. It is as a measure of costs expressed as alternatives given up. Opportunity cost is shown by the negative slope of the PPC boundary. As the nation moves along the boundary, more of one type of a good is being obtained at the cost of fewer of the other type. The steep of the slope of the PPC gets steeper as one moves from the left to the right expressing increasing opportunity cost as more and more of a good is given up for each individual unit of the other good. It can be represented by the equation;

Opportunity cost =return on the best option chosen -return on the option chosen.

X2
x
When a choice is made , an opportunity cost is incurred.in other words when a nation chooses what goods to produce it is forgoing produce other goods hence opportunity cost is the cost forgone. Moving from point C to point D on the diagram implies producing an additional amount of good X indicated by change A in the figure, at an opportunity cost of reduction in good Y indicated by change B. opportunity cost is given by the slope of the PPC and it tells us how much of one good we have to give up in order to produce one more unit of the other.

In conclusion the PPC reflects scarcity, choice and opportunity cost. Although points on and inside the PPPC are attainable poits outside are desirable but unattainable. Scarcity is reflected by the unattainable points that lie outside the PPC. Choice is reflected by the need for a nation to choose among the series of points on the PPC. the

The production possibility curve (PPC) illustrates scarcity, choice and opportunity cost. It simplifies the concept of how an economy can produce things using only two goods as an example. Suppose there are only two goods produced in the economy. The PPC shows all the different combinations of the two goods that can be produced in the economy when resources are fully and efficiently employed, given the state of the technology. It is an important tool in economics that illustrates the concepts of scarcity, choice, and opportunity cost. It is also refered as the Transformation Curve. It can be defined as a locus of all possible combinations of two goods Y and X that an economy can produce using all resources with maximum efficiency. Rarely does a country produce at either of these extremes. Instead, countries typically produce at a point somewhere along the PPF. The PPF is based on the following underlying assumptions;
1. Resources are used to maximise capacity.
2. Resources are scarce.
3. Technology remains completely constant.
4. All points along the PPC boundary are Pareto Efficient. Pareto Efficient entails that it is not possible to increase the production of one commodity without necessarily reducing the production of the other.
5. If resources are devoted to the production of good Y, the economy will be at intercept of the curve with the vertical axis where there is YO and zero good X and vice versa.
6. If the economy chooses to produce both goods then any choice along the PPC is possible.
7. Points above the PPC are desirable but unattainable given the current pool of economy’s resources
8. Points below or inside the PPC represent inefficient points. These points can also denote idle resources.
9. The PPC is concave to the origin. The concavity represents that resources are not perfectly occupationally mobile. Resources are not equally suited to all types of production.
Scarcity
Scarcity is illustrated by point a which lies outside the production possibility curve. We would like to produce that amount of Y and X but it is not possible given our existing resources and efficiencies. To reach point a, an increase in resources and/or an increase in efficiency of production are needed.

The PPC has a negatively slopped boundary showing the combinations that are just attainable when all the society’s resources are efficiently employed. Scarcity is defined by the unattainable combinations beyond the boundary of the production frontier. The PPC is a visual model of scarcity and efficiency. It simplifies the concept of how an economy produce goods’.

Scarcity is illustrated by point F which lies outside the production possibility curve. It is desirable to produce more of good Yand X but it is not possible given the available resources and efficiencies’. Point G indicates inefficiency. It is possible to produce more of both goods by being on the transformational frontier. Economy desires that society allocates resources to their best use. Resource allocation in many economies is performed by market forces. Consumers indicate their preferences by purchasing goods and services. Producers desire to satisfy the consumer demands through using scarce resources to produce goods and services that consumers demand. This is how the society decides who gets what. It is how scarce resources are allocated and distributed efficiently in our economy
Choice arises from scarcity and inherent limitations in resources endowments. Analysis focuses on individual choice. Concept assumes that people are rational though there are irrational consumers who are affected by addiction, habits and at times idol worshiping.
.As illustrated by the diagram below the points A indicates an efficient in production. Outside the curve shows increase in production but however it is unattainable. The point inside the curve B represents magnitude of inefficiency. Because of scarcity, choices must be made by consumers, businesses and governments. For example, over one million people travel into Harare each day and they make decisions about when to travel, whether to use the bus, the tube, to walk or cycle or work from home. Millions of decisions are taken, many of them are habitual – but somehow on most days, people get to work on time and they get home too in safety if not in comfort. We are always uncovering of new wants and needs which producers attempt to supply by using factors of production.

Y1

Y2

X1 X2

The PPC illustrates how a nation should allocate resources between various possible kinds of production. Where to locate on the PPC boundary is graphical representation of how this key question may be answered. Each point on the boundary indicates specific combinations of the possible output. At point A, the nation is able to produce X1 goods and Y1 goods. A move further down the PPC to point B represents another choice a nation can take where it can produce X2 goods and Y2 goods. Choice is reflected by the need for society to choose among the series of points on the PPC such as point A and point B. The PPC is a series of points of efficiently attainable outputs.

According to (Mabry-Uibirch,1994; Hyman,19991), the opportunity cost of using a resource is the value of the second best alternative forgone when using the resource for the best option. The cost of choosing to use a resource for one purpose is measured by the sacrifice of the best next alternative for using the resource. Opportunity cost looks into how individuals and businesses weigh different options. It is as a measure of costs expressed as alternatives given up. Opportunity cost is shown by the negative slope of the PPC boundary. As the nation moves along the boundary, more of one type of a good is being obtained at the cost of fewer of the other type. The steep of the slope of the PPC gets steeper as one moves from the left to the right expressing increasing opportunity cost as more and more of a good is given up for each individual unit of the other good. It can be represented by the equation;

Opportunity cost =return on the best option chosen -return on the option chosen.

X2
x
When a choice is made , an opportunity cost is incurred.in other words when a nation chooses what goods to produce it is forgoing produce other goods hence opportunity cost is the cost forgone. Moving from point C to point D on the diagram implies producing an additional amount of good X indicated by change A in the figure, at an opportunity cost of reduction in good Y indicated by change B. opportunity cost is given by the slope of the PPC and it tells us how much of one good we have to give up in order to produce one more unit of the other.

In conclusion the PPC reflects scarcity, choice and opportunity cost. Although points on and inside the PPPC are attainable poits outside are desirable but unattainable. Scarcity is reflected by the unattainable points that lie outside the PPC. Choice is reflected by the need for a nation to choose among the series of points on the PPC. the