Question

PPF ( PRODUCTION POSSIBILITY FRONTEIR IS NORMALLY USED TO ILLUSTRATE ECONOMIC GROWTH. HOW TO A DISCUSS OR EXPLAIN IT USING THE MAIN FACTORS THAT CONTRIBUTE TO ECONOMIC GROWTH,

Answer 1

The production possibility frontier depicts all alternative combinations of two goods that can be produced in a specific time frame by an economy with the limited available resources and technology. It is utilized to illustrate the concepts of efficiency, inefficiency, trade-offs, opportunity cost, scarcity, and also show the effects of economic growth. A nation would require an improvement in the productivity, an increase in factor resources, specialisation, new production methods, new raw material, increasing the labor force, and innovations in technology to reach this combination and contributing to the economic growth. The factors that contribute in PPF curve and economic growth are:

-- Scarcity of resources: PPF shows a combination of items that an economy has the capacity to produce

-- Opportunity cost: It depicts indicates how much of consumption need to be given up to improve the investments. The negative sloped PPF reflects that in order to get more of one item, it needs to produce less of the other (a trade off).

-- Law of increasing cost: The curve bows will outward because of law of increasing cost. The law of increasing costs arises when production uses more resources in the production of any certain good

-- Efficiency: The items and resources that are produced by an economy plotted on the PPF are categorised to be technically efficient, and the items and resources that are lying beneath the curve depicts the inefficiency