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Production Possibility Curve: Principle of Economics (Fpec1014)

The document discusses key concepts relating to production possibility curves (PPC), including: 1) A PPC shows the maximum possible output combinations of two goods an economy can produce with limited resources and a given state of technology. 2) Points on the PPC represent efficient use of resources, while inside the curve is inefficient. An unattainable combination is outside the curve. 3) Assumptions for a PPC include only two goods are produced, resources and technology levels are fixed. 4) Opportunity cost is represented as the forgone quantity of one good from producing another.

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John Tey
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71 views16 pages

Production Possibility Curve: Principle of Economics (Fpec1014)

The document discusses key concepts relating to production possibility curves (PPC), including: 1) A PPC shows the maximum possible output combinations of two goods an economy can produce with limited resources and a given state of technology. 2) Points on the PPC represent efficient use of resources, while inside the curve is inefficient. An unattainable combination is outside the curve. 3) Assumptions for a PPC include only two goods are produced, resources and technology levels are fixed. 4) Opportunity cost is represented as the forgone quantity of one good from producing another.

Uploaded by

John Tey
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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PRODUCTION

POSSIBILITY CURVE
PRINCIPLE OF ECONOMICS(FPEC1
GROUP MEMBERS

• Tey Weng Hong


• Lee Shu Qin
• Khor Jia Ern
• Chang Xiao Qing
• Kieran Lim Shen Jie
Opportunity Cost

Hospital

Money University
Production Possibility
Curve

Show Maximum Economic Resources


Possible Output Growth Fully Utilized
In Economy
Production Possibility
Curve

• Point A,B,C,G,H
– Maximum
output
• Point D and E-
inefficient
• Point F-
unattainable
Only 2 goods is Amount of
produced resources is fixed

Assumption made when


drawing PPC

Technology
Resources is
…….level is
………fully utilized
constant
Constant Opportunity
Cost

Steady
potential price

Opportunity cost = Production


output
Data Table
Combinatio Good A Good B
n (Textbook) ( Computers
)
A 0 12
B 1 10
C 2 8
D 3 6
E 4 4
F 5 2
Graph of Constant
Opportunity Cost

• Downward Sloping
Straight Line
Law of Increasing
Opportunity Cost

Producti Producti
on of on of Increasing
opportunit
one another y cost of
good good another
increase decreas good
s es
Data Table
Combination Cameras Mobile Phones

A 10 10

B 20 9

C 30 7

D 40 4

E 50 0
Graph of Increasing
Opportunity Cost

• Bowed-Out
Shape
Form of Subsidy

Cash
Payments Tax Relief Fertilisers Tractor
Changes when Government
provide subsidy to the farmer

If the
government
provides
subsidies to Food
the farmers,
what are the
changes that
would likely
to occur?
Clothes
Changes when government
provide subsidy to the farmer
Letting go
QUOTE OF THE

doesn’t
means you
don’t care
about it
anymore.
DAY

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