Question

Given a Production Possibilities Curve (PPC) model describing combinations of production goods within a country or describing economic growth or inefficiencies, relate the model assumptions to the situation shown in the graph (model) and draw conclusions.

Answer 1

Production possibility curve:- a graphical model shows all of the different combinations of two goods that can be produced within the given resources and technology in the economy

Assumptions of production possibilities analysis are:

(1) resources are used to produce 1 or both of only two goods,

(2) the quantities of the resources are constant,

(3) technology and production techniques are constant, and

(4) resources are used in a technically efficient and effective way.

Economic Growth:

the meaning of economic growth is a rise in what an economy can produce if it is using all its scarce resources. A rise in an economy's productive potential can be shown by an outward shift in the economy's production possibility curve (PPC).

The Production Possibilities Frontier(PPF) is a model that captures scarcity and the opportunity costs of choices when faced with the possibility of producing 2 goods or services. Points on the interior of the Production Possibilities frontier are inefficient, points on the Production Possibilities frontier are efficient, and points beyond the Production Possibilities frontier are unattainable.