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L-2 Microeconomics PPF
L-2 Microeconomics PPF
-PPF
- Shape of PPF
-Increasing Opportunity Cost
- Economic Concepts within a
PPF Framework
Ref:
1. Economics (8e), Roger A. Arnold
2. Economics (16e), Paul A. Samuelson and William D. Nordhaus
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Production Possibilities Frontier (PPF)
-Represents the possible combinations of two goods that can be
produced in a certain period of time under the conditions of a
given state of technology and fully employed resources.
Example:
Only two goods can be produced in an economy:
• Computers and
• Television sets
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Example: PPF
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Shape of PPF
-Shape of PPF depends on nature of Opportunity
Cost of goods.
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Example: Straight-line PPF
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Example: Bowed-outward (concave) PPF
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Increasing Opportunity Cost
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Economic Concepts within a PPF
Framework
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PPF: Scarcity
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PPF: Choice and OC
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PPF: Productive Efficiency, Inefficiency
and Unemployed Resources
At F, Resources
are unused
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PPF: Economic Growth
Economic growth refers to Economic Growth
the increased productive shifts the PPF
capabilities of an economy. outward. Now,
individual or society
Two major factors that affect can get more of
what they want
economic growth are -
( 1 ) a n i n c re a s e i n t h e
quantity of resources (new
discovery of resources) and
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