Graphing Production Possibilities Curves.docx

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University of Calgary
Business and Environment
BSEN 401
William Huddleston

Graphing Production Possibilities Curves: Production Possiblities Curve Wheat (Millions of Bushels) 25 (Assuming constant OC between Options) 20 15 10 5 0 0 5 9 12 15 17 19 20 Apples (Millions of Bushels) The diagram above graphs our sample Production Possibilities Frontier as a Curve (PPC) with Apples on the horizontal axis and Wheat on the Vertical Axis. The graph of our actual example would be simply the 7 maximum output combinations possible if regions produced either all wheat or all apples. The Production Possibilities Curve above relaxes this assumption by allowing the regions to produce any combination of wheat and apples. Note the following. a) Points on the Production Possibilities Curve are maximum output combinations. They imply the efficient use of all resources. b) Points inside the Production Possibilities Curve, such as (12, 15) for example, represent either unused resources or an inefficient use of resources. c) Points outside (above) the Production Possibilities Curve, such as (15, 15) for example, represent combinations that are unattainable with the given resource and technology. Characteristics of the Production Possibilities Curve 1. The Slope is Negative. Recall that the slope of a line is Rise/Run or Y/X (dY/dX in calculus notation). The slope of a PPC must be negative because the use of all resources means that an increase in one output necessitates a transfer of resources from production of the other output and thus reduction of the output of the other resource. Scarcity of resources on the frontier means that an increase in one output implies a decrease in anoth
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