Consider the following production possibilities frontier mod

Consider the following production possibilities frontier model for an economy that produces only two goods: wheat and smartphones. 80 + PPF 60 40 + 20 20 40 60 80 100 WHEAT (Millions of bushels)

Solution

The fact that there are only two goods produced in this theoretical economy is a simplifying assumption that still allows economists to demonstrate key economic concepts.

(The production possibilities curve demonstrates one of the key principle which says that if all the economy’s resources are in use, production of more of one good is possible only if less of another good is produced. A production possibility frontier (PPF) illustrates the maximum possible combinations of two goods or services produced by an economy while all resources are completely and efficiently employed)