welcome genieuses I'm genie your best
buddy for A-levels in this channel
we'll bring you to explore the secret
formula behind success
Hello! I'm Ms Ngew Ngew! So today we are going to learn the very first curve that we are
going to do in either IG syllabus or
A-level syllabus and this curve is very
useful throughout the entire economics
syllabus. Okay now, it is one of the
most popular questions in your multiple
choice - like almost without fail that you
will definitely have a choice of
questions of PPC and then secondly in
your essay questions it is considered
one of the most popular questions also.
So come on let's learn, let's understand
the construction of PPC in this short
video. Now first of all PPC stands for
production possibility curve as well you
can see from the like whiteboard. Okay?
In economic study the
first thing we need to do is definition. The definition for PPC is, okay basically,
PPC is a curve - okay we all know that - but
then, it is a curve showing
all possible combinations of two goods
that okay you can put here either a
country or a firm can produce
with its available
resources or level of technology
and that is I've got a short word for you to
replace this "available resources and the
level of technology" so you can put "with
its available resources and level of
technology you can change this word to
"with its factor endowment" factor
endowment basically includes everything
your resources your skill your level of
technology your climate your weather or
whatsoever so this is the definition for
PPC and let's look at the PPC diagram
okay actually no matter what you put -good A good B iPad Macbook or whatever it is
as long as it is two different products
then it is fine so I prefer like we put
it as capital goods and consumer goods
okay and this is your PPC shape now it
shows all the possible combinations of
two goods that your country or your firms
can produce with their resources right
so it may be combination a maybe combination
B may be combination C may be
combination D or E or maybe F okay with
all your resources fully utilized these
are combinations that you can produce so
you can produce like maybe 20 units of
consumer goods with hundred units of capital goods or you may choose to
produce 80 units of consumer goods with
50 units of capital goods therefore the
first thing you need to understand while
you are doing your PPC is what is meant
by the curve itself
the curve shows you your country's
productive capacity or productive
potential
and one constraint your country's
productive capacity or productive
potential is your quantity of resources
how much resources you have will
constrain how much like how many units
of capital goods or how many units of
consumer goods or how many units of
combined capitals and consumer goods
that you can produce Secondly it is
also constrained by your quality of
resources maybe your the skill of your
labor although you have only ten labors
but all your labors are very productive
and efficient then you will be able to
produce more of both goods and likewise although
you have only ten machines but your
machines is advanced machine highly
productive machine and then you can
produce more both goods as well so that
is the first thing that you need to
understand while you are trying to do
PPC okay moving on
first thing second thing we will need to
use PPC to understand economic problem
of scarcity so there is scarcity the
first economic terms and we learn which
is limited resources to face unlimited
wants so if you are to identify scarcity
from the PPC diagram your resources are
limited well you come like produce that
much of goods and services so scarcity
is shown when you place a combination
outside your PPC so beyond your PPC so
I put this combination K so scarcity
is shown by point K or combination K
okay which is totally outside your PPC
whereby you cannot like produce up to
this extent you cannot produce this much
of consumer goods plus this much of
capital goods okay it is unattainable
however essay questions might ask you how
we can consume at K
in the shower run or in the long run so
guys go and find out second economic problem
we learn is choice so all the
combinations on PPC or below PPC are
your choices okay so but then because we
are based on one simple assumption
whereby we assume like resources are
fully utilized then in order to lead to
the following problem so we assume that
you are producing on the PPC okay so all
the combinations and you see from A all
the way to F they are consider your
choices but what are the factors
affecting which choices you go for it is
highly depending on government policies if it is controlled by the government
so what government wants to produce
let's say governments might prefer to
produce more consumer goods rather than
capital goods and government might go
for choice or combination D or E or C
okay and if it is firms
it is highly depending on consumer
preference because consumer preference
will determine firms' sales and
therefore determining firms profit
okay out of their combinations out of
their choices
okay and lastly we all learn after you
make choice it will lead to something
called opportunity cost which is the
best alternative giving up so let's say
we give an example yeah
you are now switching from combination A
to combination B so as what you can see
from the diagram when you are switching
from combination a to B combination a
you can produce hundred capital goods
with twenty consumer goods combination B
you are producing fifty consumer goods
and let's say 75 capital goods so as you can
see from combination A to combination B
you increase the production of consumer
goods
by 30 units
how do you manage to increase the
production of consumer goods by 30
unites okay by giving up
 
25 units of capital goods the thing that
you give up in order to achieve another
objective that is the opportunity cost
therefore the opportunity cost of this
decision changing from A to B is 25
units of capital goods forgone so that
is your opportunity cost okay
okay as mentioned just now something
that you forgone for another choice or
another option that is your opportunity
cost so the 25 units of capital goods is
basically you know opportunity costs all
right so moving on guys let's look at
the third point that we need to understand
from this PPC yar the third point you need to
understand combination F or
combination B when you are producing on
one axis this situation we call it
specialization
specialization meaning that firms or
country they focus or the concentrate on
the production of one thing so therefore
if you look at combination
F yar so I pur put combo kay so in combo F you
are producing only capital goods
you use all your resources to produce
only capital goods
likewise for combo E you use all your
resources to produce consumer goods
therefore these two combinations are said
to be specialization combination E you
specialize in the production of consumer
goods therefore you produce zero capital
goods okay
combination F you produce only capital goods therefore you produce zero consumer
goods that's how it works
that's all for
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