Production Possibilities Curve

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Presentation transcript:

Production Possibilities Curve Thinking about Trade Offs, Opportunity Costs, and Efficiency

Production Possibilities Curve—Constant Opportunity Cost Quantity of coconuts D 30 Not feasible Feasible and efficient in production A 15 C B Production possibilities curve (PPC) 9 Feasible but not efficient 20 28 40 Quantity of fish

Production Possibilities Curve—Increasing Opportunity Cost Quantity of coconuts 35 Producing the first 20 fish… … requires giving up only 5 coconuts. 30 But producing 20 more fish… A 25 20 15 … requires giving up 25 more coconuts. 10 PPC 5 10 20 30 40 50 Quantity of fish

Production Possibilities Curve—Economic Growth Not feasible Quantity of coconuts Economic growth now makes E feasible (more of both products is now possible) 35 E 30 A 25 20 15 New PPC (after economic growth) 10 Original PPC 5 10 20 30 40 50 Quantity of fish