Production Possibilities Curve

Production–possibility frontier (PPF), sometimes called a production–possibility curve or product transformation curve, is a graph that compares the production rates of two commodities that use the same fixed total of the factors of production.

• PPC is u sed to explain the basic economic concepts of scarcity, choices and opportunity cost. 

• The PPC shows the various possible combinations of goods and services produced within a specified time with all its resources (land, labour, capital) fully and efficiently employed.

• 3 specified assumptions to illustrate the PPC

1.  The economy is operating in full employment and full production capacity
2. the amount of resources available is fixed
3. The state of technology does not change throughout production

• Examples: production possibilities schedule

Combinations	Foods (units)	Shoes (units)
A	0	10
B	1	9
C	2	7
D	3	4
E	4	0

• If combination B is selected, the country will simultaneously produce 1 unit of foods and 9 units of shoes (fully utilizing the country’s factors of production)

• The production of foods ↑, the production of shoes ↓. 

1. If we wants to produces food __ units we can produces shoes ___ units, and when we wants to increase the production of foods from 0 to 1 units, the production of shoes must be decreased by ___ units( from 10 units to 9 units)
2.  And when we increase the production of foods by another 1 units (from 1 to 2 units), the production of shoes must be decreased by ___ units (from 9 units to 7 units). This situation occurs due to _________ of factor of production in the economy. 

•  Thus, the opportunity cost to produce additional units of foods will increase.