PRODUCTION POSSIBILITY CURVE FREE

If we go back to the previous PPF diagram, if we increase our output of Good X (i.e. Reallocating scarce resources from one product to another involves an opportunity cost. Producing more of both goods would represent an improvement in our economic welfare providing that the products are giving consumers a positive satisfaction and therefore an improvement in what is called allocative efficiency If we achieve this then output combination D may become attainable. A country would require an increase in factor resources, or an increase in the efficiency (or productivity) of factor resources or an improvement in technology to reach this combination of Good X and Good Y. Point D is unattainable at the moment because it lies beyond the PPF. We could increase total output by moving towards the production possibility frontier and reaching any of points C, A or B. In the diagram above, point X is an example of this.

PRODUCTION POSSIBILITY CURVE FREE

The point on and off the Production Possibility Curveįeel free to join our Facebook group and subscribe to this website to get daily educational content in your mailbox.ĭisclosure: Some of the links on the website are ads, meaning at no additional cost to you, I will earn a commission if you click through or make a purchase. Please support me so that I can continue writing great content for you.Combinations of output of goods X and Y lying inside the PPF occur when there are unemployed resources or when the economy uses resources inefficiently.What are the Central problems of the economy?.Let’s assume given PPC is AB, as the technology degrades against good Y, then PPC rotates inwards on the Y-axis, as shown below. When the technology degrades against 1 good(let it be good Y) only, then the PPC rotates inwards on the Y-axis.

Let’s assume given PPC is AB, as the technology degrades against good X, then PPC rotates inwards on the X-axis, as shown below. When the technology degrades against 1 good(let it be good x) only, then the PPC rotates on the X-axis. Let’s assume given PPC is AB, as the technology improves in the favor of good Y, then PPC rotates outwards on the Y-axis, as shown below. When the technology improves in the favor of 1 good(let it be good Y) only, then the PPC rotates only on the Y-axis. Improvement in Technology in the favor of Good Y Let’s assume given PPC is AB, as the technology improves in the favor of good X, then PPC rotates outwards on the X-axis, as shown below. When the technology improves in the favor of 1 good(let it be good x) only, then the PPC rotates only on the X-axis. Improvement in Technology in the favor of Good X Let’s assume given PPC is AB, as the resources decrease against good Y, then PPC rotates inwards on the Y-axis, as shown below. When the resources decrease against 1 good(let it be good Y) only, then the PPC rotates inwards only on the Y-axis. Let’s assume given PPC is AB, as the resources decrease against good X, then PPC rotates inwards on the X-axis, as shown below.

When the resources decrease against 1 good(let it be good X) only, then the PPC rotates inwards only on the X-axis. Let’s assume given PPC is AB, as the resources grow in the favor of good X, then PPC rotates outwards on the Y-axis, as shown below. When the resources grow in the favor of 1 good(let it be good Y) only, then the PPC rotates only on the Y-axis. Growth of Resources in the favor of Good Y Let’s assume given PPC is AB, as the resources grow in the favor of good X, then PPC rotates outwards on the X-axis, as shown below. When the resources grow in the favor of 1 good(let it be good x) only, then the PPC rotates only on the X-axis. Growth of Resources in the favor of Good X

Improvement in technology in the favor of any 1 good or product.Growth of resources in the favor of any 1 good or product.

Production possibility curve