Production Possiblity Curve
Production Possibility Curve (PPC): Matthew Du
A production possibility curve (PPC) also recognized as a production possibility frontier (PPF) is a helpful graph which shows the variations of two or more goods and services that can be produced while using all of the available resources efficiently (using all resources to its full potential) . (Riley, 2012) A production possibility curve may illustrate; scarcity, choice, opportunity cost, unemployment and economic growth.
There are three basic factors of production which are land, labour and capital. These three factors are often regarded as "producer goods" so as to distinguish the difference between the goods or services consumed by consumers, which are often labelled as "consumer goods." (Riley, 2012)
Source: (Riley, 2012)
Point X, which is inside the curve represent and occurs when ones resources are not used to its full potential or otherwise unemployment. This happens due the resources not being used efficiently, we can increase actual input to be able to in increase potential output attained, which will move point X towards the curve where point A, B and C lies.
Point A, B and C represents the choices that one can choose from in the variety of combinations that is attainable within the limit of using the community’s resources to its full potential. The choices are normally made by managers and entrepreneurs.
Point D, is unattainable and cannot be achieved in this state of its current situation, it is at this moment impossible, the only way to achieve point D is if the community or society that is represented in the diagram attains an increase in numbers of factors of production, increase in the efficiency of factors of production or an improvement in technology (an invention), the achievement of point D represents economic growth.
The area of space which point D lies in is the area at which scarcity is represented, scarcity is when one has
A production possibility curve (PPC) also recognized as a production possibility frontier (PPF) is a helpful graph which shows the variations of two or more goods and services that can be produced while using all of the available resources efficiently (using all resources to its full potential) . (Riley, 2012) A production possibility curve may illustrate; scarcity, choice, opportunity cost, unemployment and economic growth.
There are three basic factors of production which are land, labour and capital. These three factors are often regarded as "producer goods" so as to distinguish the difference between the goods or services consumed by consumers, which are often labelled as "consumer goods." (Riley, 2012)
Source: (Riley, 2012)
Point X, which is inside the curve represent and occurs when ones resources are not used to its full potential or otherwise unemployment. This happens due the resources not being used efficiently, we can increase actual input to be able to in increase potential output attained, which will move point X towards the curve where point A, B and C lies.
Point A, B and C represents the choices that one can choose from in the variety of combinations that is attainable within the limit of using the community’s resources to its full potential. The choices are normally made by managers and entrepreneurs.
Point D, is unattainable and cannot be achieved in this state of its current situation, it is at this moment impossible, the only way to achieve point D is if the community or society that is represented in the diagram attains an increase in numbers of factors of production, increase in the efficiency of factors of production or an improvement in technology (an invention), the achievement of point D represents economic growth.
The area of space which point D lies in is the area at which scarcity is represented, scarcity is when one has
Bibliography: Mohr, P., 2012 . understanding microeconomics. first edition ed. Pretoria : van Schaik . Riley, G., 2012. tutor2u.net. [Online] Available at: http://tutor2u.net/economics/revision-notes/as-markets-production-possibility-frontier.html [Accessed 23 January 2014].