How does a production possibility curve illustrates the trade off of supply and demand?
1 Answer
The short answer is that it does not illustrate this.
Explanation:
The production possibilities frontier has nothing to do with demand. It does relate to supply, indirectly, by showing how increasing the production of one good eventually requires decreasing the production of another good.
Supply and demand do not have a "trade-off"; we do not substitute one for the other. Each refers to the preferences and behaviors of a group of market actors. Supply describes the preferences and behaviors of sellers; demand describes the preferences and behaviors of buyers. As such, these two groups do not directly "trade off" with respect to each other.
I would suggest following two separate lines of questioning: 1) questions about the production possibilities frontier, and 2) questions about the market forces of supply and demand.
