chapter 1 ppc

8/13/2019 Chapter 1 Ppc

http://slidepdf.com/reader/full/chapter-1-ppc 1/28

PRODUCTION

POSSIBILITY CURVE@ PRODUCTION

POSSIBILITY FRONTIER



PPC

FUNCTION

DEFINITION

ASSUMPTION

HOW TO

DRAW PPC

SHIFT ONTHE PPC

SHAPE OF PPC

Production Possibility Curve(PPC)



Production Possibility Curve(PPC)

FUNCTION:

To explain the basic economic concepts .

DEFINITION:

Shows the maximum combination of output aneconomy can produce in a given period oftime, with its available resources andtechnology



Assumption:

1. 2 products

2. Fully employed

3. technology unchanged

4. Fixed resources

Goods A

Goods B



PIZZA 0 1 2 3 4(in hundred thousands)

ROBOTS 10 9 7 4 0(in thousands)

in table form

How to draw PPC





in table form

graphical form

R o b o

t s

( t h o u s a

n d s )

Pizzas (hundred thousands)

PRODUCTION POSSIBILITIES



Robots(thousands)

Pizzas(hundred thousands)





in table form

graphical form

R o b o

t s

( t h o u s a

n d s )






R o b o

t s

( t h o u s a

n d s )






in table form

graphical form

R o b o

t s

( t h o u s a

n d s )







in table form

graphical form

R o b o

t s

( t h o u s a

n d s )


Connectthe point

http://highered.mcgraw-hill.com/sites/0072819359/student_view0/chapter2/interactive_graphs.html



Q

Q

R o b o t

s ( t h o u s a n d

s )


14

13

12

11

109

8

7

6

5

4

3

2

1

1 2 3 4 5 6 7 8

A B

C

D

E

X

Attainablebut

Inefficient

Unattainable/scarcity

Attainable

& Efficient

Y



Combination Cars Motorcycles

A 15 0

B 14 1

C 12 2

D 9 3

E 5 4

F 0 5

cars

motorcycles

Graph of PPC



a) Define production possibilities curve (PPC) (2 marks)

b) Explain the type of opportunity cost faced by this economy. (2 marks)

c) Sketch a production possibilities curve (PPC) for the economy and label the following:

Point X to show inefficiency

Point Y to show a scarcity of resources

Point Z to show an occurrence of unemployment in the economy.(3 marks)

d) Calculate the opportunity cost:

i- of producing 100 units of computer

ii- of producing 30 units of radio

iii- when the production of computer decreases from 150 units to 50 units of computer.

Exercise 1:



How to calculate opp cost???

Combination Computer (units) Radio (units) Opportunity Cost of

producing Radio

A 200 0 -

B 150 10 50

C 100 20 50

D 50 30 50E 0 40 50-50

-50

-50

-50 +10

+10

+10

+10

Question 3, Part B - Apr 2008

h h f d h f i



The shape of PPC and the types of Opportunity Cost

Increasing Opportunity

Cost

Decreasing Opportunity

Cost

Constant Opportunity

Cost

A linear PPC shows that theopportunity cost is constant

Combination Good A Good B

A 6 0

B 3 1

C 1 2

D 0 3


A 6 0

B 4 1

C 2 2

D 0 3


A 6 0

B 5 1

C 3 2

D 0 3

Good A

Good B

Good B

Good B

Good AGood A

A concave PPC shows thatthe opportunity cost isincreasing

A convex PPC shows thatthe opportunity cost isdecreasing



Factors That Influence The Shift of PPC

Factors:

1.Economic growth

2.Natural disaster3.Improvement in technology

4.Population



Economic growth

Goods A

Goods B

Economic growth is made possibleby increasing the quantity or quality

of the economy's resources (labor,

capital, land, and entrepreneurship).

With economic growth more of

both goods can be produced.



Natural disaster

Goods A

Goods B



Improvement in technology

Goods A

Goods B

l i



Population

Goods A

Goods B

Goods A

Goods B

↑Population ↓Population



Exercise 2:

The diagram above shows the Production Possibilities Curve (PPC) ofcement and tile in an economy.

Cement (bag)

Tile (unit)1500 20000

2500

6000



Cont…..

a) Calculate the opportunity cost of:

i- Producing 2000 units of tile (1 mark)

ii- Increasing the production of cement from 2500 bags to 6000 bags (1 mark)

iii- What is the economic concept shown by point M and N in the diagram (2 marks)

b) Give two assumptions to explain the production possibilities curve. (2 marks)

c) In separate diagram, draw the effect of advancement in technology of producing cemenPPC. (2 marks)

d) Suggest two ways that this economy can increase the production the production of both

the future.



Assignment Eco 162

Economic SystemTitle Group

Socialism 1

Capitalism 2Mixed 3

Islamic 4

Format :

Tahoma 10, 1.5 spacing..



Content:1.0 Introduction

2.0 Definition of Islamic Economy

3.0 Characteristic of Islamic System

4.0 The advantages & Disadvantages

4.1 Advantages4.2 Disadvantages

5.0 How Islamic System solve the economicproblems

6.0 which country use this economy system

7.0 Conclusion

8.0 Reference

chapter 1 ppc

Documents