production possibility curve
production possibility curve
The production possibility curve or frontier is a curve that shows the maximum combination of two goods (usually capital and consumer goods) that can be produced by a given economy using its available resources at the present level of technology.
ASSUMPTIONS
- The quality and quantity of economic resources available for use are fixed .
- some resources are better adapted for the production of one good than the other.
- Technology is fixed.
- They are three main types of PPC depending on the opportunity cost.
- CONCAVE PPC ( Increasing opportunity cost ): Here, the amount forgone to Increase the production of one good over the other increases as production continues. Illustrate.
- CONVEX PPC ( Decreasing opportunity cost ): Here, the amount forgone to increase the production of one good over the other is Decreasing as production continues. Illustrate.
- LINEAR PPC ( Constant opportunity cost ) : Here, the amount of good forgone to produce another good is constant at all level. Illustrate.
