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    Economics: Production possibilities frontier.

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    Can you please help on sketching a PPF for two goods that you choose. Assume the economy is in equilibrium at one point on the curve (label that point A)?

    Explain which events would cause the economy to move from point A to either a point inside the curve, another point on the curve, or a point outside the curve.

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    Solution Preview

    See the attached file for the solution in a Word doc.

    Assume that an economy has 100 units of steel that can be used to manufacture cars or computers. The analogy will use the below table. At point A, the economy would have used all its steel in making cars with no computers. However as you go down along the curve the possible combinations change. At point B all the steel will be used to make 4 units computers and 20 units of cars.

    The same effect occurs at the different points along the curve. For the curve to shift or ...

    Solution Summary

    The problem deals with explaining and illustrating the production possibilities frontier. It also helps sketch a PPF for some chosen goods.