A production possibility frontier is used to illustrate the concepts of opportunity cost, trade-offs and also show the effects of economic growth.
What does a PPF illustrate?
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. The PPF demonstrates that the production of one commodity may increase only if the production of the other commodity decreases .
Which of the following concepts does a PPF or graph illustrate?
Key Points. The Production Possibilities Frontier (PPF) is a graph that shows all the different combinations of output of two goods that can be produced using available resources and technology. The PPF captures the concepts of scarcity, choice, and tradeoffs .
What information is shown by a PPF PPC graph?
A production–possibility frontier (PPF), production possibility curve (PPC), or production possibility boundary (PPB), or transformation curve/boundary/frontier is a curve which shows various combinations of the amounts of two goods which can be produced within the given resources and technology/a graphical ...
Which of the following concepts is illustrated by a production possibilities frontier?
The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. The PPC can be used to illustrate the concepts of scarcity, opportunity cost, efficiency, inefficiency, economic growth, and contractions .
How does a PPF illustrate scarcity?
Scarcity is demonstrated by considering the difference between points like C, outside the frontier, and points like A and B, either on the frontier or on its interior. ... The addition of the PPF curve thus illustrates scarcity by dividing production space into attainable and unattainable levels of production .
Can a PPF curve be a straight line?
A straight line PPF: A straight line PPF where the opportunity cost is constant . The slope of the PPF shows the rate at which the production of one good can be transferred to another. ... Within an economy, if the capacity to produce both goods increases, the result is economic growth.
What does a PPF show quizlet?
Shows the maximum potential combination of outputs an economy can produce with its current resources and technology . ...
What are the four factors of production?
Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship . The first factor of production is land, but this includes any natural resource used to produce goods and services. This includes not just land, but anything that comes from the land.
Why is a PPF curved?
The first is the fact that the budget constraint is a straight line. This is because its slope is given by the relative prices of the two goods. In contrast, the PPF has a curved shape because of the law of the diminishing returns .
What is PPC explain with diagram?
The production possibilities curve (PPC) is a graph that shows all of the different combinations of output that can be produced given current resources and technology . Sometimes called the production possibilities frontier (PPF), the PPC illustrates scarcity and tradeoffs.
What is a PPC graph?
Definition. production possibilities curve (PPC) (also called a production possibilities frontier) a graphical model that represents all of the different combinations of two goods that can be produced ; the PPC captures scarcity of resources and opportunity costs. opportunity cost.
Which is the basic production function?
A production function relates the input of factors of production to the output of goods. In the basic production function inputs are typically capital and labor , though more expansive and complex production functions may include other variables such as land or natural resources.
