Production Possibility Frontier: Different Combinations

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The production possibility frontier shows the different combinations that can be produced of two or more goods using all available resources efficiently. It is used as a visual representation of economical efficiency, economies, big or small, can look at it to see where they are on it and what they need to do to improve efficiency. If an economy rises above the curve, they are expanding, this is called economic growth and is what most economies strive to achieve, it means they are producing more goods than they have available resources, to achieve this, more resources would need to be attained or better technology would be needed to increase efficiency further. Any points that lie within the curve show inefficient production and unemployment within the economy.

The PPF is an example of opportunity choice; if they choose one good to produce more of than the other, shifting the use of resources, the opportunity forgone is the benefits of the other good. Whereas if they manage to increase their resources, they can make more of both, or more of one or the other without sacrificing the alternative.

The PPF can be used to show efficiency within an economy by allowing them to see what they must do to maximise their use of resources. If this isn’t done then they would be risking their economy, causing unemployment and wasted resources. With scarce resources, the factors of production must be used to their full potential, so that each citizen of an economy contributes to that economy, using capital to efficiently achieve more production of goods/services from land/resources. Within a country, the government would need to use a PPF to measure their position and growth in economy, e.g. China would have a PPF that is swelling each year by around 4%PA due to foreign investment and high labour, whereas Greece would have one shrinking due to high unemployment and scarcity of resources.

A larger economy might invest in other countries such as building factories abroad to...
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