What does the slope of a PPC represent?

The slope of a production possibilities curve illustrates the tradeoff between the production of two goods. This tradeoff occurs due to limited resources. If all available resources are engaged production, then an increase in the production of one good requires a reduction in the production of the other good.

Why is the slope of a PPF always negative?

The negative slope of the PPF illustrates the fact that larger quantities of cars correspond to a smaller amount of milk, and vice versa. This happens because all the economy’s resources are already in use, and therefore obtaining more cars would always require sacrificing some milk.

What does a production possibilities curve show?

The Production Possibilities Curve (PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. The PPC can be used to illustrate the concepts of scarcity, opportunity cost, efficiency, inefficiency, economic growth, and contractions.

Why is PPF downward sloping and concave?

PPF is concave to the origin which reflects increasing opportunity cost i.e. as one moves downward on the PPF, the amount of production of one good that needs to be sacrificed so as to increase the production of the other good.

How a PPC illustrates opportunity cost?

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

How does PPC show economic growth?

Economic growth in the production possibilities curve (PPC) model. The production possibilities curve illustrates the maximum combination of output of two goods that an economy can produce, such as capital goods and consumption goods. If that curve shifts out, the capacity to produce has increased.

How does PPC illustrate scarcity?

‘Scarcity’ is revealed by the fact that any movement along the PPC (like moving from point D to F), So if the production of good-x is increased from R to S then the production of good-y decreases from C to E which indicates that the resources are limited or scarce because if production of one good increases then the …

Why is PPF downward?

The PPF is downward sloping because it depicts the trade-off between two products. Due to the limitation of resources and technology, if the economy… See full answer below.

What does a production possibilities frontier illustrate?

In business analysis, the production possibility frontier (PPF) is a curve that illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture.

What production possibility curve illustrates?

In business analysis, the production possibility frontier (PPF) is a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources. The PPF demonstrates that the production of one commodity may increase only if the production of the other commodity decreases.