Question

production possibilities frontier (PPF) to explain and illustrate the concepts “efficiency”, “trade-off”, “opportunity cost” and “unemployment”.

Answer 1

A production possibility frontier (ppf) or also called production possibility curve is a possible trade off of producing combinations of goods with constant technology and resources per unit time. one good can be produced by diverting resources from other goods, and also produces less of them.The PPF curve shows the maximum possible production level of one commodity for any given production level of other, given the exixting state of technology. So that , it defines the efficiency of that production set.

An opportunity cost will usually aise whenever an economic agent choses between alternative ways of allocating scarce resources. The opportunity cost of such decision is valuable of next best alternative use of scarce resources. Oppotunity cost can be ilustrated by using PPF which provide a simple , yet powerful tool to illustrate the effects of making an economic choice. It is useful in two reasons :

1) It can be an objective for an economy because it can set a direction towards which an economy can move.

2) It can help highlight the imperfection and rigidities that exist in an economy.

A PPF used to illustrate how the unemployment of resources causes a society to produce a fewer goods and services than possible. If all the economic resources are fully and efficiently employed in a production, the output of the U.S economy occures at the point on PPF curve. when ther is high unemployment level then the production points on the PPF curves shown below the fully efficient points on the curve. increase in unempoyment or inefficiency move the production point further from PPF point that represent less of goods and services.

If a social goal satisfy as many needs and wants for material possessions as possible, then society should strive too produce at a production point on the PPF.