帕金经济学第9版课件Ch02-9e-lecture.pptVIP

Production Possibilities and Opportunity Cost The production possibilities frontier (PPF) is the boundary between those combinations of goods and services that can be produced and those that cannot. To illustrate the PPF, we focus on two goods at a time and hold the quantities of all other goods and services constant. That is, we look at a model economy in which everything remains the same (ceteris paribus) except the two goods we’re considering. Production Possibilities and Opportunity Cost Production Possibilities Frontier Figure 2.1 shows the PPF for two goods: cola and pizza. Any point on the frontier such as E and any point inside the PPF such as Z are attainable. Points outside the PPF are unattainable. Production Possibilities and Opportunity Cost Production Efficiency We achieve production efficiency if we cannot produce more of one good without producing less of some other good. Points on the frontier are efficient. Production Possibilities and Opportunity Cost Any point inside the frontier, such as Z, is inefficient. At such a point, it is possible to produce more of one good without producing less of the other good. At Z, resources are either unemployed or misallocated. Production Possibilities and Opportunity Cost Tradeoff Along the PPF Every choice along the PPF involves a tradeoff. On this PPF, we must give up some cola to get more pizzas or give up some pizzas to get more cola. Production Possibilities and Opportunity Cost Opportunity Cost As we move down along the PPF, we produce more pizzas, but the quantity of cola we can produce decreases. The opportunity cost of a pizza is the cola forgone. Production Possibilities and Opportunity Cost In moving from E to F, the quantity of pizzas increases by 1 million. The quantity of cola decreases by 5 million cans. The opportunity cost of the fifth 1 million pizzas is 5 million cans of cola. One of these pizzas costs 5 cans of cola. Production Possibilities and Opportunity Cost In moving from F to E