Ppf Diagram Macro. An increase in an economy s productive potential can be shown by an outward shift in the economy s production possibility frontier ppf. The slope of the ppf corresponds to the costs of producing an extra unit of x.
The production possibilities frontier ppf for short also referred to as production possibilities curve is a simple way to show these production tradeoffs graphically. An outward shift of a ppf means that an economy has increased its capacity to produce. Ppf and opportunity cost we normally draw a ppf on a diagram as concave to the origin i e.
Diagram of production possibility frontier.
As we move down the ppf as more resources are allocated towards good y the extra output gets smaller so more of good x has to be given up in order to produce good y. The bowed outward shape of the ppf represents increasing opportunity costs of production because it indicates that it is becoming more and more costly to produce the good on the x axis. Fig 1 1 shows a ppf for food and cloth assuming all resources are fully employed in the most efficient way. A diagram that shows the productively efficient combinations of two products that an economy can produce given.
