PPC/PPG

Production Possibilities Graph AKA: PPG- shows alternative ways to use an economy’s resources. (PPC-Curve)
4 Assumptions:

• Two Goods
• Fixed Resources (land, labor, capital & entrepreneurship)
• Fixed Technology
• Full Employment of Resources

Efficiency- using resources in such a way as to maximize the production of goods & services

Allocative Efficiency- products being produced are the ones most desired by society

Productive Efficiency- products are being produced in the least costly way & this means any point on (PPC)

Underutilization- using fewer resources than an economy is capable of using

• C -inside the curve-you are unattainable but inefficient: underutilization
• B & D-on the curve-You are attainable and efficient: it is producing
• E -outside of the curve-Unattainable

What causes the PPC/PPG to shift?

• Technological Changes
• Economic Growth
• Change in Resources
• Change in Labor Force
• Natural Disasters, War, Famine
•  More education & training

∆ (delta) -change

 

 Production Possibilities Graph (PPG)- shows alternative ways to use an economy’s resources. (PPC-Curve)
4 Assumptions:
-Two Goods
-Fixed Resources (land, labor, capital & entrepreneurship)
-Fixed Technology
-Full Employment of Resources

Efficiency- using resources in such a way as to maximize the production of goods & services

Allocative Efficiency- products being produced are the ones most desired by society

Productive Efficiency- products are being produced in the least costly way & this means any point on (PPC)

Underutilization- using fewer resources than an economy is capable of using



 C -inside the curve
You are unattainable but inefficient: underutilizationB & D-on the curve
You are attainable and efficient: it is producing
E -outside of the curve
Unattainable



What causes the PPC/PPG to shift?

Technological Changes
Economic Growth
Change in Resources
Change in Labor Force
Natural Disasters, War, Famine
 More education & training
∆ (delta) -change