Production Possibility Curve

Ceretis Paribus
All other things remaining equal.

Economics 11/9/13

Production Possibility curve

Not achievable in long run

Pareto Optimal x efficient

Inefficient

What it means?
The curve is showing the maximum output possibilities for two or more foods given a set of inputs ( factors of production). The curve assumes that all inputs are used efficiently.

Where curve is?

The factors of production will affect where the production possibility curve lies. If you increase the FofP then the curve will move outwards meaning that the Pareto Optimal of the output of goods will change. This can be shown using the word equation : OUTPUT= f(FofP). By changing f you change directly the output that can be produced.

Production Possibility Curve