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Explain the graph of a production possibilities curve. What can we read on the graph? Be...

Explain the graph of a production possibilities curve. What can we read on the graph? Be thurough.

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Answer #1

The PPF graph shows the combination of the two goods being produced in the economy, here the goods are Steel and Food. It shows all the combination that the nation can produce and the good which the nation have to give up for producing another good, as the PPf is downward sloping it means that to produce more of one good the economy has to give up more and more of the other good.

With the help of the graph we can tell what combination of good the nation is producing. Here, US is producing 100 food and 50 steel, to increase the production of steel the US has to give up 20 Food and they will gain 20 steel. The production will move from C to D. At point A the nation is producing only Steel and at B they are producing only food.

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