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The production possibility frontier

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The production possibility frontier

  1. 1. The Production Possibility Frontier<br />An “individual” example<br />
  2. 2. What is the production possibility frontier?<br />The PPF is a graphical representation of the possible combinations of the production of two goods or services that the economy can produce at any given time<br />
  3. 3. So let’s use an everyday example to explain how the production possibility frontier actually works...<br />
  4. 4. Scenario: Spend more on flowers or invite more guests to the wedding?<br />In this PPF, when making full use of resources, one can choose between choices A-G when deciding on how much to spend on flowers as opposed to how many guests they may invite to their wedding<br />Guests<br />Flowers ($)<br />
  5. 5. Scenario: Spend more on flowers or invite more guests to the wedding?<br />The curve shows how when more is spent on one choice, more of the other choice must be foregone, as there is a limited amount of resources. In other words, if one bought 600 units worth of flowers, they would not be able to afford to have any wedding guests :O<br />Guests<br />Flowers (units)<br />
  6. 6. Scenario: Spend more on flowers or invite more guests to the wedding?<br />Therefore, because all resources are being used, making a choice beyond the boundary line (on the right of the line) is impossible!<br />Guests<br />Flowers ($)<br />
  7. 7. Scenario: Spend more on flowers or invite more guests to the wedding?<br />If one were to make a decision placed on the left of the boundary line, they would have money left over that they could be using to have a more elaborate wedding<br />Guests<br />Flowers ($)<br />
  8. 8. So, overall:<br />The PPF is a helpful tool in calculating the opportunity cost of making any choices<br />This concept cannot only be applied to individual examples such as this, but to economic decisions also <br />
  9. 9. Proudly brought to you by:<br />Angela Green<br />

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