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A PPF typically takes the form of the curve illustrated above. An economy that is operating on the PPF is said to be efficient, meaning that it would be impossible to produce more of one good without decreasing production of the other good. In contrast, if the economy is operating below the curve, it is said to be operating inefficiently ...
The production possibilities frontier (PPF) for guns versus butter. Points like X that are outside the PPF are impossible to achieve. Points such as B, C, and D illustrate the trade-off between guns and butter: at these levels of production, producing more of one requires producing less of the other. Points located along the PPF curve represent ...
The PPF is linear with a downward slope in two circumstances: If the technology for gathering coconuts and hunting fish exhibits constant returns to scale; If there is only one input in production; So in the Robinson Crusoe economy, the PPF will be linear due to the presence of only one input.
The utility possibility frontier also represents a social optimum, as any point on the curve is a maximisation of the given social welfare function. [3] However, based on the extent of society’s preferences for an equal distribution of real income, a point off the curve may be preferred.
Productive capacity has a lot in common with a production possibility frontier (PPF) that is an answer to the question what the maximum production capacity of a certain economy is which means using as many economy’s resources to make the output as possible. In a standard PPF graph, two types of goods’ quantities are set.
He stated a similar condition for production, namely that the production–possibility frontier (PPF, to which he gave the alternative name of 'productive indifference curve') should be tangential with an indifference curve for the community. He was one of the originators of the PPF, having used it in a paper on international trade in 1932. [24]
The offer curve is derived from the country's PPF. We describe a Country named K which enjoys both goods Y and X. It is slightly better at producing good X, but wants to consume both goods. It wants to consume at point C or higher (above the PPF). Country K starts in Autarky at point C. At point C, country K can produce (and consume) 3 Y for 5 X.
A curve of output against input. The areas of increasing, diminishing and negative returns are identified at points along the curve. There is also a point of maximum yield which is the point on the curve where producing another unit of output becomes inefficient and unproductive.