Wheat

Rice

0

Production Possibilities FrontierProduction Possibilities FrontierIncreasing Opportunity CostsIncreasing Opportunity Costs

Wheat Rice

“Some resources are not easily adaptable to alternativeuses”

80787055380

020406080100

80

70

60

50

40

20

10

10 20 30 40 50 60 70 80 90 100

. . ..

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-2-8

-15-17-38

+20

Capital Goods

Consumer Goods

0

Capital Goods “Stuff you use to make other Stuff” Tools, equipment, factories, other infrastructure

Consumer Goods“Stuff” for immediate Consumption. Food, consumerElectronics, etc.

Allocative EfficiencyWhere a society decides to Produce on its PPF. A value Decision based on values/politics

Productive EfficiencyFull-employment of resources And producing at the lowest cost

.A

.B.C

.D

.E

Production Possibilities FrontierProduction Possibilities Frontier

Capital Goods

Consumer Goods

0

Capital Goods “Stuff you use to make other Stuff” Tools, equipment, factories, other infrastructure

Consumer Goods“Stuff” for immediate Consumption. Food, consumerElectronics, etc.

Allocative EfficiencyWhere a society decides to Produce on its PPF. A value Decision based on values/politics

Productive EfficiencyFull-employment of resources And producing at the lowest cost

.A

.B.C

.D

.E

.F

.G

Production Possibilities FrontierProduction Possibilities Frontier