Production-possibility frontier In economics‚ a production-possibility frontier (PPF) or “transformation curve” is a graph that shows the different quantities of two goods that an economy (or agent) could efficiently produce with limited productive resources. Points along the curve describe the trade-off between the two goods‚ that is‚ the opportunity cost. Opportunity cost here measures how much an additional unit of one good costs in units forgone of the other good. The curve illustrates that
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What is Production Possibility Frontier? Introduction Microeconomics is a branch of economics dealing with the behaviour of small individual players who impact the decision makers while allocation of resources. Microeconomics and macroeconomics are the major branches of economics. Microeconomics covers the relation of supply and demand with the price and output. Production Possibility frontier is also called as production-possibility boundary‚ production-possibility curve or product transformation
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Question 2 Show the PPF curve under decreasing and increasing returns to labour. The Production possibility frontier analyses the most efficient use of company resources to achieve different levels of production of output. Labour is one of the variables factors of production. One unique feature of the PPF is that one alternative is usually foregone in order to maximize the production of another product‚ for example‚ in a refinery a manager may decide to deploy more human resources to produce
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Outline how the production possibility frontier can be used to demonstrate opportunity cost and examine how the effects of unemployment and technical change on production in the economy. A production possibility frontier is a basic model that can examine the efficiency of an economy’s resource use‚ irrespective of the wants of that economy. A production possibility frontier is the simplest tool usable to demonstrate opportunity cost‚ at all possible combinations of two goods in production‚ the extremes
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macroeconomics known as the Production Possibility Frontier is simple to understand. It is a method used to represent (in the form of a graph) the point in which an economy is producing its goods and services with efficiency. It also shows whether the economy is allocating their resources in the best way possible. If the economy is not producing the quantities indicated by the PPF‚ resources are not being managed efficiently and the production will decrease. The production possibility frontier also shows that
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The Production Possibility Frontier Consider the case of an island economy that produces only two goods: wine and grain. In a given period of time‚ the islanders may choose to produce only wine‚ only grain‚ or a combination of the two according to the following table: Production Possibility Table Wine|Grain| (Thousand of bottles)|(Thousand of bushels)| 0|15| 5|14| 9|12| 12|9| 14|5| 15|0| The production possibility frontier (PPF)
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Production Possibilities Curve (PPC) The Production Possibilities Curve (PPC) is used to show the economic concepts of scarcity‚ choices and opportunity cost. The PPC is a graphical representation showing maximum combinations of output (goods and services)‚ a nation can produce with limited economic resources in a fixed period time. Assumptions of the production possibilities curve: I. Only 2 goods will be illustrated II. The amount of resources is fixed III. State of technology
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2 Trade-offs‚ Comparative Advantage‚ and the Market System Chapter SOLUTIONS TO END-OF-CHAPTER EXERCISES Chapter 2 Answers to Thinking Critically Questions: 1. When BMW closes down a plant for alterations it incurs the direct cost of those alterations‚ but there is also an indirect opportunity cost. If BMW closes down the plant then that means the plant is not producing automobiles which could be sold. Therefore‚ BMW’s opportunity cost is the profits that it could have earned by operating the
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of the production possibilities frontier is defined as a representation of a point at which an economy is most efficiently producing the nation’s goods and services and therefore allocating all its resource in the best way possible. If the economy is not producing at the amount of estimated quantities that are indicated by the production possibility frontier that means the resource are being managed inefficiently and the production of the economy will start to slow down. With the production possibility
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Chapter 2: Production Possibilities Curve‚ Scarcity‚ and Development I. A Market System and Basic Economic Questions 1. In a decentralized (Capitalist) society‚ “markets” are required. This market system is a means of buyer–seller exchange‚ and does not need a physical location. The idea that self–interested market participants will make everyone better off was called ”an invisible hand” by Adam Smith‚ and creates the invisible hand argument that is used in the same way today. 2. The
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