• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Describe a Production Possibility Curve, and its importance. Consider points on the PPC and inside the PPC to illustrate opportunity cost.

  • Essay length: 4853 words
  • Submitted: 19/06/2006
Share this essay:

University Degree Finance

The first 200 words of this essay...

Question 1

(a) Describe a Production Possibility Curve, and its importance. Consider points on the PPC and inside the PPC to illustrate opportunity cost.

Production Possibility Curve is a curve illustrating all maximum output possibilities of two or more goods given a set of inputs. The PPF assumes that all inputs are used efficiently.

As indicated on the exhibit 1.1, points A, B, C and D represent the points at which production of grains and wines is most efficient. Point X demonstrates the point at which resources are not being used efficiently in the production of both goods and point Y demonstrates an output that is not attainable with the given inputs

The shape of this production possibility frontier also represents the concept of opportunity cost. Choosing more output of good X usually means giving up output of good Y. For instance, if the curve moves from point A to point B, the opportunity cost of 9,000 tons of grains is a reduction in output of 3,000 tons of wines.

As more of one product is produced increasingly larger amounts of other product must be given up. If a change in demand from

Read more
The above preview is unformatted text

Found what you're looking for?

  • Start learning 29% faster today
  • Over 150,000 essays available
  • Just £6.99 a month

  • "
    A very useful service as it can help to give you ideas and get you started on your own essays/coursework.
    "
    M Singh. English. A Level Student.
  • "
    You enable students to explore areas of knowledge to improve their writing and at the same time, reduce the risk of plagiarism to balance a mix of student achievement and awareness of education.
    "
    Dean Hil. l Media, Business, ICT, History and Sciences. University Student.

Marked by a teacher

This essay has been marked by one of our great teachers. You can read the full teachers notes when you download the essay.

Peer reviewed

This essay has been reviewed by one of our specialist student essay reviewing squad. Read the full review on the essay page.

Peer reviewed

This essay has been reviewed by one of our specialist student essay reviewing squad. Read the full review under the essay preview on this page.