Given the schedule below draw the production Po... - SS2 Economics Plotting The PPC From Possible Data Question
Given the schedule below, draw the production Possibility Curve. Determine the slope of the curve and the opportunity cost of producing an additional unit of cars.
|
Production possibilities |
Cars |
Computers |
|
A |
0 |
15 |
|
B |
1 |
14 |
|
C |
2 |
12 |
|
D |
3 |
9 |
|
E |
4 |
5 |
|
F |
5 |
0 |
To draw the production possibility curve (PPC) from the table, we need to plot the points representing each combination of cars and computers and connect them with a line. The resulting curve would represent the maximum output of cars and computers that can be produced with the given resources and technology.
The slope of the PPC measures the opportunity cost of producing an additional unit of cars in terms of the units of computers that must be given up. The formula for calculating the slope is:
slope = (change in computers) / (change in cars)
For example, the slope between points A and B is:
slope_AB = (14 - 15) / (1 - 0) = -1
This means that to produce an additional car, the economy must give up one computer. Similarly, the slope between points B and C is:
slope_BC = (12 - 14) / (2 - 1) = -2
This means that to produce an additional car, the economy must give up two computers.
The opportunity cost of producing an additional unit of cars increases as we move along the PPC from left to right. This is because the resources used to produce cars are less suited for producing computers, and vice versa. In other words, the more cars we produce, the more we have to give up in terms of computers
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