![]() ![]() The reason is that the curve tells you the maximum you could produce in a country, and here, the potential increases. On the graph, demonstrate either (1) a shift of the entire curve, or (2) a movement of the point along the curve or, (3) a movement of the point inside or outside the curve that is caused by the aboveĪ Consider a graph with milk on vertical side and eggs on horizontal axis, when the general productivity increases, both factors have been increased, so answer is (1). Improvements in animal nutrition raise the general productivity of cows and chickens. On following graph, illustrate the following situation : Q Consider a country which produces only milk and eggs. If the PPF is a straight line, it indicates constant marginal productivity, or constant opportunity costs between the two goods. If the PPF is concave, it indicates diminishing marginal productivity for both goods. In a competitive market, it is the ratio of the two prices (price of x/price of y). It is also the ratio of the marginal productivity of the two goods (MP of good y/MP of good x). The slope of the PPF indicates the trade-off in production between the two goods. The region outside of the PPF is a region in which production is infeasible. When the actual production is on the PPF, the production is efficient. If the actual production (the point) is inside of the PPF, the production is said to be inefficient (more can potentially be produced). The PPF separates the xy-plane into three sectors - inside the PPF, on the PPF and outside the PPF. While the curve denotes the potential production possibilities of a country, the actual production is denoted by a point on the xy-plane. It is drawn on the axis that denote the quantity of the goods of interest. The Production Possibility Frontier/Curve is a curve that demonstrates the maximum a country can produce in a certain period of time. obtained only by cutting down the production of’another good.This article is part of the EconHelp Tutoring Wiki In a fully employed economy more of one good can be. The table shows our sacrifice of wheat goes on increasing as we move from C, towards E. ![]() Again our movement fromĪlternative B to C, involves the sacrifice of two thousand quintal of wheat for the sake of one thousand more motors of cloths. As we move on from alternative A to B, we sacrifice one thousand motor of cloth. In other words, we give up some units of wheat in order to have some more units of cloth. As we move from A towards F, We draw away some resources from the production of wheat and devote them to the production of cloth. With C, the economy can have 12 thousand and 2 thousand and so on. With production possibility B, the economy can produce 14 thousand quintal of wheat and meter of cloth. In between these two there will be many other production such as B, C, D. But these are the two extreme production possibilities. ![]() On the other hand, if all the resources are devoted to the production of cloth, 5 thousand meter of cloth arc made. If all the given resources are employed for the production of wheat, it is supposed that 15 thousand guitarist of wheat are produced. We have constructed the following table showing various production possibilities between wheat and cloth. Let us assume that there is a given amount of production resources and they remain fixed. ![]() A person has to select which product he produces more and produce less. As our resources are limited we have to choose between various goods. It is also known, as production possibility frontier. Production possibility curve is a graphical presentation of alternative production possibilities facing an economy. ![]()
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