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Production Possibility Frontier (PPF) economic model.

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Alejandro Rodríguez

on 24 September 2014

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Transcript of Production Possibility Frontier (PPF) economic model.

- PPF.
-Shifts on the model.
-Opportunity cost.

The PPF curve represents combination of amounts of two commodities (services and goods) that can be produced using a fixed amount of the factors of production.

Opportunity cost
The production possibility curve represents the opportunity cost of producing something. In the context of a PPF, opportunity cost is directly related to the shape of the curve.
Shifts on the model
A shift of the PPF results from changes of the availability in economic factors. Such a shift allows economic growth of an economy already operating at its full productivity. However, most economic contractions reflect not that less can be produced, but that the economy has started to be ineficient.
Production Possibility Frontier (PPF)economic model.
Thank you!
Feel free to ask if you have any doubt :)
A common PPF: increasing opportunity cost
A straight line PPF: constant opportunity cost
An inverted PPF: decreasing opportunity cost
Lucía Santos Muñoz
Alejandro Rodríguez Díaz
Full transcript