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Production Possibilities Curve

by Anu J
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ECON 1000
Kieran Furlong

Microeconomics (ECON 1000) DAY 2 – September 11 th Production Possibilities Frontier / Curve / Function - Production Possibility Curve = max. output combinations producible from a give set of resource inputs and a given set of technology o Production possibility curve demonstrates scarcity, choice and opportunity cost - Look at the “Canada divided into 7 regions” example in LN o Max output when you can only shift one (wheat or apples), then BC is max bc most is gained and least is lost  BC, per apple, costs 1/5 wheat  Minimize opportunity cost (lose out the least thing you can)  Opportunity cost is the slope of the curve (rise ÷ run) wheat÷ ∆Qapples  Slope doesn’t have to be constant o For AB/MN and ON/QC, it is constant o Why is opportunity cost higher in SK for producing apples than in ON? Because the resources are different (not homogenous, interchangeable) o Concave = increasing OC = resources are not identical (typical) o Convex = you make less of both; you give up what you already have AND you’re not getting enough back with your second thing  Constant slope = resources are identical; you’re not losing anything from doing anything else or changing anything  When all the resources are used and I’m moving from one to the other, the slope is always (-); why? Wh
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