economics question (1 Viewer)

AuroraXT

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The diagram represents a production possibility frontier for apples and oranges. It shows the varying amounts of oranges and apples that can be produced depending if the economy is using all their resources efficiently or not. Any point on the production possibility curve (the straight line in this case, but curved in most cases) means that the economy is using all their factors of production (land, labour, capital and enterprise) efficiently to create the maximum output possible (technical efficiency). Any point inside the production possibility frontier E.G. at A means that the economy is not using all their factors of production efficiently E.G. there are many unemployed people or businesses are not using up to date technology leading to a loss of output that the economy could be producing if everything was being used efficiently. That's why the number of oranges and apples that can be produced at A is significantly less than what can produced at any point on the line. Going outside of the line means that the production possibility frontier needs to expand or in other words the economy needs to expand their factors of production because the PPF already represents the current MAX. There are many ways to do this for example an economy can discover more natural resources like coal/iron/gold etc. (land), increase immigration of skilled workers (labour), develop new and more efficient technology to increase output (capital), subsidise new businesses to increase entrepreneurship (enterprise).
 

chrstinee

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The diagram represents a production possibility frontier for apples and oranges. It shows the varying amounts of oranges and apples that can be produced depending if the economy is using all their resources efficiently or not. Any point on the production possibility curve (the straight line in this case, but curved in most cases) means that the economy is using all their factors of production (land, labour, capital and enterprise) efficiently to create the maximum output possible (technical efficiency). Any point inside the production possibility frontier E.G. at A means that the economy is not using all their factors of production efficiently E.G. there are many unemployed people or businesses are not using up to date technology leading to a loss of output that the economy could be producing if everything was being used efficiently. That's why the number of oranges and apples that can be produced at A is significantly less than what can produced at any point on the line. Going outside of the line means that the production possibility frontier needs to expand or in other words the economy needs to expand their factors of production because the PPF already represents the current MAX. There are many ways to do this for example an economy can discover more natural resources like coal/iron/gold etc. (land), increase immigration of skilled workers (labour), develop new and more efficient technology to increase output (capital), subsidise new businesses to increase entrepreneurship (enterprise).
Omggg thank you so much!!!!
 

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