Enter the change in y and the change in x of a PPF (production possibilities frontier) curve into the calculator to determine the slope.
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PPF Formula
The following formula is used to calculate the opportunity cost of any good using the slope of a PPF line.
OC = (Y1-Y2) / (X1-X2)
- Where OC is the opportunity cost
- Y1 and Y2 are two Y points along the PPF line
- X1 and X2 are two corresponding X coordinates on the same line
To calculate opportunity cost from PPF, divide the difference between the y coordinates by the difference between the x coordinates along the line.
PPF Definition
PPF, short for production possibilities frontier, sets a combination of goods and services a society can produce given what resources they have available.
Two display this, a PPF curve is often graphed. Choices outside the slope are “impossible” and choices inside the slope are inefficient.
Example Problem
How to calculate PPF slope?
- First, determine two y coordinates along the slope.
For this example, the y coordinates are y1=5, Y2=10.
- Next, determine the two corresponding x coordinates.
For this problem, the x coordinates are x1=3, x2=12
- Finally, calculate the PPF slope:
Using the formula above, the PPF slope is calculated to be:
OC = (Y1-Y2) / (X1-X2)
OC = (5-10) / (3-12)
OC = -5 / -9
OC = .555
