A production possibility curve measures the maximum output of two goods using a fixed amount of input. What might enable the country to consume the quantities of x and y indicated by point r. Production possibility curve ppc can have three shapes. It means that in order to produce more units of x, more units of y are sacrificed or rate of. Economics 970823 paper 2 data response and essay octobernovember 2016 mark scheme. A production possibility frontier shows how much an economy can produce given existing resources. The following is a curve representing all possible combinations of two goods that can be produced by an economy where. Explain with the help of a diagram why production possibility curves are usually. The input is any combination of the four factors of production. O level economics revision notes archives teachifyme.
The production possibility curve represents graphically alternative production possibilities open to an economy. Let us assume that the united states produces only two goods. Economics 970821 paper 2 data response and essay octobernovember 2018. Production possibilities curve mesa public schools. This is the first graph you are going to learn in your economics. It is due to application of law of diminishing returns. Production possibilities curve explained with examples. Explain how capital goods contribute to production in a modern economy and how capital is rewarded.
Points within the curve show when a countrys resources are not being fully utilised combinations of the output of consumer and capital goods lying inside. Cambridge international as a level octobernovember 2016 9708 23. This short note is relating to all students who are in g. But since they are scarce, a choice has to be made between the alternative goods that can be produced. The productive resources of the community can be used for the production of various alternative goods. Production possibility curve shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology 5 of 33. Learn concepts in economics, evaluate theories, view videos, and follow analysis here to help you understand economics, and fully prepare for examinations.
A production possibility can show the different choices that an economy faces. In this video i explain how the production possibilities curve ppc shows scarcity, tradeoffs, opportunity cost, and efficiency. For example, when an economy produces on the ppf curve, increasing the output of goods will have an opportunity cost of fewer services. A increased specialisation in the production of good x b international trade c a reduction in unemployment. A production possibility frontier is used to illustrate the concepts of opportunity cost, tradeoffs and also show the effects of economic growth. In business analysis, the production possibility frontier ppf is a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources. Ppcshows all the possible combinations of 2 goods or services. Production possibility curves ppc a production possibility curve is a curve showing possible combina tions of goods that an economy can produce given a fixed amount of resources, fixed technology, and efficient use of these resources. Production possibility curve explained with diagram.
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