AS Micro PPF Diagrams

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A production possibility frontier (PPF) shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed

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AS Micro PPF Diagrams

  1. 1. Output of capital goods Output of consumer goods A B C X D A PPF shows the different combinations of goods and services that can be produced with a given amount of resources in their most efficient way Any point inside the curve – suggests resources are not being utilised efficiently Any point outside the curve – not attainable with the current level of resources
  2. 2. Output of Capital Goods Output of Consumer Goods 160 100 60 90 A B 1000 In this diagram, the opportunity cost of producing 100 units of consumer goods is the choice of to giving up 10 units of capital goods
  3. 3. Output of Capital Goods Output of Consumer Goods 160 100 60 90 A B 1000 C PPF1 PPF2
  4. 4. Output of Good B Output of Good A •A straight line PPF shows a constant opportunity cost between two products •Increasing output of good B from 60 to 90 units implies giving up 90 units of good A •The marginal opportunity cost for each extra unit of good B is 30 units of Good A A B 200 160 60 90

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