Explain how a country s production possibility curve depends upon its factors of production

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Explain how a country s production possibility curve depends upon its factors of production

Here, we turn to more macroeconomic matters that occur on the level of national economies. There are just enough apple orchards producing apples, just enough car factories making cars, and just enough accountants offering tax services.

1704 = 1671+33

If the economy is not producing the quantities indicated by the PPF, resources are being managed inefficiently and the stability of the economy will dwindle.

The production possibility frontier shows us that there are limits to production, so an economy, to achieve efficiency, must decide what combination of goods and services can and should be produced. Imagine an economy that can produce only two things: For instance, producing 5 units of wine and 5 units of cotton point B is just as desirable as producing 3 units of wine and 7 units of cotton.

Point X represents an inefficient use of resources, while point Y represents the goals that the economy simply cannot attain with its present levels of resources. As we can see, in order for this economy to produce more wine, it must give up some of the resources it is currently using to produce cotton point A.

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If the economy starts producing more cotton represented by points B and Cit would need to divert resources from making wine and, consequently, it will produce less wine than it is producing at point A.

As the figure shows, by moving production from point A to B, the economy must decrease wine production by a small amount in comparison to the increase in cotton output.

However, if the economy moves from point B to C, wine output will be significantly reduced while the increase in cotton will be quite small. Keep in mind that A, B, and C all represent the most efficient allocation of resources for the economy; the nation must decide how to achieve the PPF and which combination to use.

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If more wine is in demand, the cost of increasing its output is proportional to the cost of decreasing cotton production. Markets play an important role in telling the economy what the PPF ought to look like. Consider point X on the figure above. On the other hand, point Y, as we mentioned above, represents an output level that is currently unattainable by this economy.

But, if there were a change in technology while the level of land, labor and capital remained the same, the time required to pick cotton and grapes would be reduced.

Output would increase, and the PPF would be pushed outwards. A new curve, represented in the figure below on which Y would fall, would then represent the new efficient allocation of resources. When the PPF shifts outwards, we can imply that there has been growth in an economy. Alternatively, when the PPF shifts inwards it indicates that the economy is shrinking due to a failure in its allocation of resources and optimal production capability.

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A shrinking economy could be a result of a decrease in supplies or a deficiency in technology. An economy can only be producing on the PPF curve in theory; in reality, economies constantly struggle to reach an optimal production capacity.

And because scarcity forces an economy to forgo some choice in favor of others, the slope of the PPF will always be negative; if production of product A increases then production of product B will have to decrease accordingly.

Trade, Comparative Advantage and Absolute Advantage Specialization and Comparative Advantage An economy may be able to produce for itself all of the goods and services it needs to function using the PPF as a guide, but this may actually lead to an overall inefficient allocation of resources and hinder future growth — when considering the benefits of trade.

Through specializationa country can concentrate on the production of just a few things that it can do best, rather than dividing up its resources among everything.

Let us consider a hypothetical world that has just two countries Country A and Country B and only two products cars and cotton. Suppose that Country A has very little fertile land and an abundance of steel available for car production.

Country B, on the other hand, has an abundance of fertile land but very little steel. If Country A were to try to produce both cars and cotton, it would need to divide up its resources, and since it requires a great deal of effort to produce cotton by irrigating its land, Country A would have to sacrifice producing cars — which it is much more capable of doing.

The opportunity cost of producing both cars and cotton is high for Country A, as it will have to give up a lot of capital in order to produce both. Similarly, for Country B, the opportunity cost of producing both products is high because the effort required to produce cars is far greater than that of producing cotton.

Each country in our example can produce one of these products more efficiently at a lower cost than the other.What does a country's production possibilities curve depend on? It depends on available resources and technology. An underutilization of a country's resources means what?

The technology behind lab-cultured meat products is rapidly advancing. When we start seeing these kinds of products being sold right alongside their traditionally farmed cousins, we should look more at the contentious topic of the impact livestock farming has on the environment.

The space environment is so inconvenient for human beings. There is so much that one has to bring along to keep them alive.

Life Support has to supply each crew member daily with kilograms of air, about kilograms of water, and about kilograms of (wet) food (less if you are recycling).Some kind of artificial gravity or a medical way to keep the bones and muscles from wasting away.

Davos 1. A small town in Switzerland, that has been host to the annual meeting of the World Economic Forum since 2.

Explain how a country s production possibility curve depends upon its factors of production

Shorthand for that meeting, which includes leaders from the worlds of government, politics, business, civil society, and academia. Production Possibility Curve: A Basic Tool of Economics.

We shall explain the production possibilities with these two goods but the analysis made will equally apply to the choice between any other two goods. a free-market economy will operate depends upon the consumers’ demand for different goods. In other words, in a free-market.

The world uses the US dollar as the main reserve currency. This has let the US collect an inflation tax from most of the world and to purchase real goods in exchange for pieces of paper.

The world won't go along with this forever. As this comes to an end the value of the dollar will drop drastically.

Explain how a country s production possibility curve depends upon its factors of production
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