Production Possibilities Curve (PPC) Worksheet
All PPC’s Reflect Increasing Opportunity Costs
For Numbers 1-10, think the change affects all markets. On all graphs, place “Consumer Goods” on the X Axis and place “Capital Goods” on the Y.
1) Hurricane Katrina does significant damage to New Orleans.
2) New technology makes production more efficient.
3) The plague kills many.
4) Studies show less people are going to college.
5) Studies show more people are finishing high school and less people are dropping out.
6) A once thriving city becomes abandoned.
7) Yuma becomes discovered and the population grows by millions.
8) Y2K happens and all technology crashes.
9) The United States increases the number of countries it trades its goods with.
10) John Deere starts producing better tractors.
I don't want the answers. I just need someone to explain what consumer and capital foods are. I just switched to this class today and have no idea what's going on. help please!
Google should be a big help in catching up with your class.
http://www.investopedia.com/terms/c/consumer-goods.asp
http://www.investopedia.com/terms/c/capitalgoods.asp
Of course, I'm here to help you understand! In the context of a production possibilities curve (PPC), consumer goods and capital goods are two types of goods that are produced in an economy.
Consumer goods are the products and services that are directly consumed by individuals to satisfy their wants and needs. Examples of consumer goods include food, clothing, furniture, electronics, and services like haircuts or entertainment. These goods are produced to meet the immediate demands of consumers and directly contribute to their well-being and standard of living.
Capital goods, on the other hand, are goods that are used by businesses to produce other goods and services. They are typically long-lasting and are used in the production process rather than being consumed directly by individuals. Capital goods include things like machinery, tools, equipment, factories, and infrastructure. They are essential for enhancing productivity and increasing the future output of an economy.
In the production possibilities curve (PPC) framework, consumer goods and capital goods are represented as the two axes. The X-axis is usually labeled with consumer goods, indicating the quantity of consumer goods that can be produced, while the Y-axis is labeled with capital goods, indicating the quantity of capital goods that can be produced. The PPC shows the different combinations of these goods that an economy can produce given its resources and technology.
The concept of opportunity cost is also important to understand when analyzing a PPC. Opportunity cost refers to the value of the next best alternative that must be sacrificed in order to produce more of a particular good. In the context of the PPC, it means that increasing the production of one type of good (e.g., consumer goods) comes at the expense of producing less of the other type (e.g., capital goods). This trade-off is illustrated by the shape of the curve, which is typically bowed outward, indicating increasing opportunity costs.
I hope this explanation helps you in understanding the concept of consumer goods and capital goods in the context of a production possibilities curve (PPC). If you have any further questions, feel free to ask!