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Production Possibilities Curve(PPF) - Coggle Diagram
Production Possibilities Curve(PPF)
Why do we need this ?
There are scarce resources
These resources need to be distributed among different outcomes.
What is it?
All possible combinations of outputs that can be produced.
Assumptions
Resources are fixed for both the quantities.
Efficient use of those resources.
Two outputs are considered.
Eg: Only 10 hours available for maths and eco.Depending on the distribution of hours the grades received in both the subjects differ.
Any point inside the curve shows inefficient use of resc as all resc are not utilised
On the curve is best .Outside the curve is impossible
Opportunity Cost
Highest valued forgoned alternative when a choice is made
Constant Opportunity cost
Decrease in the production of one increases the production of the other by the same amount
Increasing Opportunity Cost
When all resources are being used ,an increase in the production of one good leads to greater foregone production of the other good
Increase in the production of pineapples will decrease the production of cacti by a greater amount
PPC and Resource changes
Two products like computer and wheat require different resouces
If a resource change only benefits only one product then the graph
PPC curve can shift
