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production possibilities frontier

production possibilities frontier. Production Possibilities Frontier. The model of production possibilities frontier shows the maximum quantity of two goods that can be produced due to scarcity . The model is based on four simplifying assumptions. Production Possibilities Frontier.

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production possibilities frontier

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  1. production possibilities frontier

  2. Production Possibilities Frontier • The model of production possibilities frontier shows the maximum quantity of two goods that can be produced due to scarcity. • The model is based on four simplifying assumptions

  3. Production Possibilities Frontier • Two Goods: the economy produces only agricultural products (such as crops ….) and capital goods (such as machines and factories). • Common Resources: the same resources can be used to produce either or both of the two classes of goods and can be shifted freely between them.

  4. Production Possibilities Frontier • Fixed Conditions : the supply of resources and the state of technological knowledge are fixed. • Full Employment : society’s available resources are working in the most (technically) efficient way.

  5. Production Possibilities Frontier a0 15 b 1 14 c 2 12 d 3 9 e 4 5 f 5 0

  6. 15 10 5 0 1 2 3 4 5 Production Possibilities Frontier

  7. a 15 10 5 0 1 2 3 4 5 Production Possibilities Frontier

  8. a 15 b 10 5 0 1 2 3 4 5 Production Possibilities Frontier

  9. a 15 b c 10 5 0 1 2 3 4 5 Production Possibilities Frontier

  10. a 15 b c 10 d 5 0 1 2 3 4 5 Production Possibilities Frontier

  11. a 15 b c 10 d 5 e 0 1 2 3 4 5 Production Possibilities Frontier

  12. a 15 b c 10 d 5 e f 0 1 2 3 4 5 Production Possibilities Frontier

  13. a 15 b c 10 d 5 e f 0 1 2 3 4 5 Production Possibilities Frontier

  14. a 15 b Unattainable c 10 d Attainable 5 e f 0 1 2 3 4 5 Production Possibilities Frontier

  15. a 15 b Unattainable c 10 d Attainable 5 e z f 0 1 2 3 4 5 Production Possibilities Frontier

  16. Using Resources Efficiently • Marginal cost • The opportunity cost of producing one more unit of a good or service. • The marginal cost of an additional capital good is the quantity of agricultural good that must be given up.

  17. a 15 b c 10 d 5 5 e f 0 1 2 3 4 5 Production Possibilities Frontier and Marginal Cost

  18. a 15 b c 10 d 5 5 e f 0 1 2 3 4 5 0 1 2 3 4 5 Production Possibilities Frontier and Marginal Cost

  19. a Increasing opportunity cost 15 b c 10 d 5 5 e f 0 1 2 3 4 5 0 1 2 3 4 5 Production Possibilities Frontier and Marginal Cost

  20. Production Possibilities Frontier and Marginal Cost a Increasing opportunity cost 15 b c 10 d 5 5 e f 0 1 2 3 4 5 0 1 2 3 4 5

  21. Production Possibilities Frontier and Marginal Cost a Increasing opportunity cost 15 b c 10 d e 5 5 f 0 1 2 3 4 5 0 1 2 3 4 5

  22. Production Possibilities Frontier and Marginal Cost a Increasing opportunity cost 15 b c 10 d e 5 5 f 0 1 2 3 4 5 0 1 2 3 4 5

  23. Production Possibilities Frontier and Marginal Cost 5 …means increasing marginal cost 4 3 2 1 0 1 2 3 4 5

  24. MC 5 …means increasing marginal cost 4 3 2 1 0 1 2 3 4 5 Production Possibilities Frontier and Marginal Cost

  25. MC 5 …means increasing marginal cost 4 3 2 1 0 1 2 3 4 5 Production Possibilities Frontier and Marginal Cost

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