state two properties of production possibility curve
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A production possibility curve measures the maximum output of two goods using a fixed amount of input. The input is any combination of the four factors of production. They are land and other natural resources, labor, capital goods, and entrepreneurship. The manufacture of most goods requires a mix of all four.
Each point on the curve shows how much of each good will be produced when resources shift from making more of one good and less of the other. The curve measures the trade-off between producing one good versus another.
For example, say an economy can produce 20,000 oranges and 120,000 apples. On the chart, that's point B. If it wants to produce more oranges, it must produce fewer apples. On the chart, Point C shows that if it produces 45,000 oranges, it can only produce 85,000 apples.
By describing this trade off, the curve demonstrates the concept of opportunity cost. Making more of one good will cost society the opportunity of making more of the other good. The production possibility curve delineates the cost of society's choice between two different goods.
A production possibility curve measures the maximum output of two goods using a fixed amount of input. The input is any combination of the four factors of production. They are land and other natural resources, labor, capital goods, and entrepreneurship. The manufacture of most goods requires a mix of all four.
Each point on the curve shows how much of each good will be produced when resources shift from making more of one good and less of the other. The curve measures the trade-off between producing one good versus another.
For example, say an economy can produce 20,000 oranges and 120,000 apples. On the chart, that's point B. If it wants to produce more oranges, it must produce fewer apples. On the chart, Point C shows that if it produces 45,000 oranges, it can only produce 85,000 apples.
By describing this trade off, the curve demonstrates the concept of opportunity cost. Making more of one good will cost society the opportunity of making more of the other good. The production possibility curve delineates the cost of society's choice between two different goods.
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