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Unit 1 - Production Possibilities Graphs (PPG) and Movements


                    Production Possibilities Graphs (PPG, PPC, or PPF)
 
A.K.A Production Possibilities Curve or Frontier
 

 
-Each point shows trade-off
-Shows alternative ways to use resources
- Shows most that society can produce if it uses every available resources to best of ability

Point A
(Inside the curve) - Attainable, inefficient, underutilization
Unemployment, Underemployment, war, famine, natural disasters Recession/Depression
Point B [Curve of the Frontier]
(on the curve) attainable & efficient
**Utilization of resources efficiently**
Point C-
(Unattainable -Outside the curve)
*Technology
*Economic Growth
Key Assumptions
  1. Full employment (not possible w/ laziness, disabled + retired)
            *80-90% factor capacity
            *4-5% unemployment
  1. Productive Efficiency
  2. Fixed Resources
           *Land
           *Labor
           *Capital
  1. Fixed State of Tech.
  2. No international trade
  3. Two Goods Produced
 
Movements of the PPG
  1. Inside of the Curve
 *Underutilization of Resources 
  1. Along the Curve
Image result for movements of ppfs
*Less of one product and more of another 
  1. Shifts of the Curve
Image result for movements of ppfs
                                                              *Can shift left or right
                                                        
Concave

*Bowed out
* Law of Increasing Opportunity Cost
-As you produce more of one good, the opportunity cost (the forgone production of another good) will increase
Constant


*Constant Opportunity Cost
Allocative Efficiency
-products being produced are desired by economy
               vs.
Productive Efficiency
-products are being produced in least costly way
 Points B, D and C
 

Comments

  1. UnknownFebruary 6, 2018 at 7:06 AM

    I found insight in your explanation of Basic economic Concepts but i wish you would thoroughly explain the facts of the PPG , it is evident where the points would be on the curve and what it would determine but you had no examples as to wether it would be a company that had too many employees and not enough customers to cause inefficiency or so forth. Although i had an issue with that the color on your blog stands out, the formatting is too clustered and hard to read , Thank you for reading my critique.

    ReplyDelete

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