Production possibility curves essay
Explain how production possibility curves can be used to demonstrate the problem of unemployment, effects of technological change and the benefits of economic growth.
Human wants are unlimited and resources are scarce. In order to satisfy these wants, all societies face the problem of allocating these scarce resources to producing the wanted products. These decisions greatly affect the economy and will contribute to the movements of growth. A graph that visually represents the results of the decisions and maps the growth of the economy is the production possibility curve.
Production possibility curves (PPC) are graphical models used to demonstrate the different opportunity costs that are involved when individuals or communities make choices on how much of each product to produce. The graph depicts the different combinations of two alternative products that can be produced, given technology and a fixed amount of resources. The two axes represent the amount of each product produced and the curve (frontier) shows the maximum amount of each resource able to be produced when all of the resources are used to their full capacity (refer to Figure 1. Most diagrams discussed will only deal with straight frontiers for the purpose of a clear visual). The resources are the factors of production which consists of natural resources, human labour, capital goods and enterprises. The position of the economy is often shown by a dot or a cross and its position depends on the economy’s production status. The PPC also makes a number of assumptions including the fact that economy will produces only two different goods, the state of the technology will remain constant, and the quantity of the resources remain the same and are both fully employed and used efficiently. The production possibility curve is thus able to graphically represent the problems of unemployment, the effects of technological change on the products produced and also show the benefits of economic growth in an
Human wants are unlimited and resources are scarce. In order to satisfy these wants, all societies face the problem of allocating these scarce resources to producing the wanted products. These decisions greatly affect the economy and will contribute to the movements of growth. A graph that visually represents the results of the decisions and maps the growth of the economy is the production possibility curve.
Production possibility curves (PPC) are graphical models used to demonstrate the different opportunity costs that are involved when individuals or communities make choices on how much of each product to produce. The graph depicts the different combinations of two alternative products that can be produced, given technology and a fixed amount of resources. The two axes represent the amount of each product produced and the curve (frontier) shows the maximum amount of each resource able to be produced when all of the resources are used to their full capacity (refer to Figure 1. Most diagrams discussed will only deal with straight frontiers for the purpose of a clear visual). The resources are the factors of production which consists of natural resources, human labour, capital goods and enterprises. The position of the economy is often shown by a dot or a cross and its position depends on the economy’s production status. The PPC also makes a number of assumptions including the fact that economy will produces only two different goods, the state of the technology will remain constant, and the quantity of the resources remain the same and are both fully employed and used efficiently. The production possibility curve is thus able to graphically represent the problems of unemployment, the effects of technological change on the products produced and also show the benefits of economic growth in an