Question

1. Explain the relationship between the bowed-out shape of the production possibilities frontier and the increasing opportunity cost of a good as more of it is produced? (Minimum 150 words) (3 points)

2. What is the difference between quantity demanded and demand? Explain the factors that change the demand. (Minimum 150 words) (5 points)

Answer 1

The Production Possibilities Curve (PPC) is a model used to illustrate the tradeoffs associated with resource allocation between two goods. The PPC can be used to illustrate the notions of scarcity, cost of opportunity, efficiency, inefficiency, economic growth, and contractions. The Production Possibilities Curve (PPC) is a model that captures the scarcity and the cost of choice when faced with the probability of two products or services being produced. Points on the PPC 's interior are ineffective, points on the PPC are efficient, and points beyond the PPC are unachievable. The opportunity cost of moving from one efficient production combination to another efficient production combination is how much of one commodity is given up to get more of the other good.
The PPC shape also gives us knowledge about the production process ( i.e. how the resources are combined to manufacture certain goods). The law of increasing the cost of opportunity tells us that, as the economy moves along the curve of production possibilities toward more than one good, its cost of opportunity will increase. We may infer that as the economy progressed along this curve toward greater safety efficiency, the opportunity cost of additional protection started to grow. This is because the resources transferred to the production of protection from the production of other goods and services had a greater and greater competitive advantage in manufacturing items other than health.

A demand change refers to a shift in the entire demand curve, caused by a variety of factors (preferences, income, substitute and complement prices, expectations, population, etc.). In this case, the entire demand curve transitions to either left or right.

A requested change in quantity refers to a move along the demand curve which is caused only by a price chance. In this case the demand curve is not moving; instead we are moving along the current demand curve.