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SECTION 4: PRODUCTION POSSIBILITY FRONTIER

PRODUCTION POSSIBILITY FRONTIER A graph that shows all combi atio s o! T"O goo#s or s$r%ic$s that ca b$ pro#&c$# i! all o! soci$t'(s r$so&rc$s ar$ &s$# $!!ici$ tl' Th$ PPF ill&strat$s th$ tra#$ o!!s !aci g a $co om' that pro#&c$s o l' two goo#s) It shows th$ ma*im&m +&a tit' o! o $ goo# that ca b$ pro#&c$# !or a ' gi%$ +&a tit' o! th$ oth$r)

ASSU,PTIONS ABOUT T-E PPF .)/ Amo& t o! r$so&rc$s is !i*$# 0 !actors o! pro#&ctio 1 la # or raw mat$rials labor capital 2pla t 3 $+&ipm$ t/ $ tr$pr$ $&rship 4)/ Stat$ o! t$ch olog' is !i*$# 5)/ "$ ha%$ !&ll $mplo'm$ t o! all r$so&rc$s No & $mplo'm$ t o! labor No $*c$ss capacit' i !actori$s 6)/ "$ &s$ all r$so&rc$s $!!ici$ tl' PPF shows ma*im&m o&tp&t possibiliti$s that ar$ a%ailabl$ Poi ts o&tsi#$ th$ PPF ar$ ot possibl$ gi%$ c&rr$ t r$so&rc$s a # t$ch olog' Poi ts i si#$ th$ PPF ar$ i $!!ici$ t B' b$tt$r &tili7atio o! r$so&rc$s8 w$ co&l# achi$%$ poi ts o th$ PPF

CONCEPT OF EFFICIENCY

3 Poi ts o th$ !ro ti$r ar$ $!!ici$ t

"-Y IS A COUNTRY INSIDE ITS PPF9 U $mplo'm$ t o! labor U #$r$mplo'm$ t o! labor U #$r &s$ o! pla t 3 $+&ipm$ t I $!!ici$ t allocatio o! r$so&rc$s PPF ILLUSTRATES F&ll $mplo'm$ t E!!ici$ c' Choic$ Eco omic growth Opport& it' cost S&ppos$ w$ ar$ o th$ PPF To pro#&c$ mor$ o! o $ it$m8 w$ m&st gi%$ &p som$ o! th$ oth$r it$m I! w$ ar$ i si#$ th$ PPF8 w$ ca i cr$as$ pro#&ctio o! $ith$r or both o! th$ it$ms b' b$comi g mor$ $!!ici$ t DIFFERENT POINTS ON T-E PPF REFLECT DIFFERENT C-OICES ,ADE BY SOCIETY A $co om' ca pro#&c$ a ' combi atio o! o&tp&ts o its PPF Di!!$r$ t soci$ti$s will choos$ #i!!$r$ t combi atio s E:/ Di!!$r$ t choic$s ma#$ b' soci$ti$s USA %s) SO;IET UNION USA1 Emphasis o pro#&ctio o! co s&mptio goo#s USSR1 Emphasis o pro#&ctio o! militar' goo#s E:/ Capital <oo#s ;S) Co s&mptio <oo#s Co s&mptio goo#s1 !oo#8 cloth$s8 cars8 T;s8 st$r$os8 $tc) Capital goo#s1 !actori$s8 tractors8 #rill pr$ss$s8 $tc) <OAL1 ECONO,IC <RO"T I cr$as$ o&tp&t Shi!t th$ PPF to th$ right ,or$ o&tp&t 2p$r p$rso / = -igh$r sta #ar# o! li%i g

SOURCES OF <RO"T,ORE AND BETTER P-YSICAL CAPITAL Tools8 comp&t$rs8 ass$mbl' li $s8 t$ch olog' R$s$arch 3 #$%$lopm$ t BETTER -U,AN CAPITAL B$tt$r a # smart$r wor>$rs E#&catio 3 trai i g CON<O .???1 USA .???1 BAPAN .???1 @A NE" CAPITAL .@A NE" CAPITAL 5CA NE" CAPITAL