Production Possibility Curves Essay Essay

Explain how drudgery supposition curves asshole be employ to demonstrate the problem of unemployment, effect of technological change and the benefits of economic growth. Human wants argon unlimited and resources ar solitary(prenominal). In order to satisfy these wants, all societies face the problem of allocating these scarce resources to producing the wanted products. These decisions greatly affect the economic system and bequeath contribute to the movements of growth. A graph that visually represents the results of the decisions and maps the growth of the thriftiness is the production possibility curve. ware possibility curves (PPC) are graphical models apply to demonstrate the different hazard costs that are involved when individuals or communities make choices on how a great channel of apiece product to produce. The graph depicts the different combinations of dickens alternative products that after part be produced, given technology and a fixed criterion of res ources. The two axes represent the amount of each product produced and the curve ( bound) shows the maximum amount of each resource equal to(p) to be produced when all of the resources are used to their full capacity (refer to Figure 1. Most diagrams discussed bequeath only deal with straight bournes for the purpose of a clear visual).The resources are the factors of production which consists of inherent resources, human labour, smashing goods and enterprises. The position of the economy is often shown by a dot or a cross and its position depends on the economys production status. The PPC excessively makes a number of assumptions including the fact that economy leave al wholeness produces only two different goods, the state of the technology get out remain constant, and the quantity of the resources remain the same and are both full employed and used efficiently. The production possibility curve is thus qualified to graphically represent the problems of unemployment, the c ause of technological change on the products produced and also show the benefits of economic growth in an economy. Production possibility curves dissolve used to demonstrate the problems of unemployment when producing the products in the economy. In the graph, it takes all of the factors of production into account. and so unemployment will mean that not all of the resources are being fully engaged and used to their full potential.The frontier in this case will not change, however the position of the economy will move at a lower place the curve. For example (refer to Figure 2), if the economy is producing two products X and Y, the frontier does not change and instead the position of the economy on the graph willshift depending on the amount of resources are not being used. The unless away the economy is from the curve, the to a greater extent resources unemployed. In this situation, the graph signifies that there is an uneffective allocation of resources. It conveys the econom y is neither satisfying the maximum amount of wants nor achieving stripped opportunity costs. Essentially the economy is not using its resources to their full potential, or sacrificing the lowest amount of opportunity costs to produce the products. By faulting the dot around, the PPC makes it very obvious to where in economy is at in productions efficiency and thus fag end influence decisions in order to tame the problem of unemployment. The production possibility curve is also able to demonstrate the effects of technological change on the production of the products.Newer technology creates more efficient production methods and thus allows the economy to produce more of unitary product without an increase in opportunity costs. The application of newer, more fur-bearing technology is represented by an outward shift in the various(prenominal) product axis. In the example (refer to Figure 3), due to technological advancements it has do producing product X more efficient, thu s allowing more of product X to be produced. The lack of movement in the Y axis portrays how there was no increase in opportunity cost for producing product Y when more of product X was produced. The shift also shows the new frontier for the economy. The amount of shift can be adjusted to abide a model of the future economy if it decides to go through with technological advancements in one area. Therefore, the PPC is a great model representation of how technological changes can affect the production possibilities on an economy.Production possibility curves enable the fable of how the process of economic growth occurs. Economic growth occurs when more resources are able to be used or existing resources are used more efficiently. Economies often have to decide whether to produce more of capital goods or consumer goods. Producing more consumer goods will satisfy the wants immediately and thus provide higher meter of living in the present, compared to producing more capital goods whi ch does not satisfy many wants right away. However, it provides the economy with larger production abilities later(prenominal) on and thus will be able to satisfy more wants in the future. In Figure 4 (the figure deals with concave frontier to represent more of a realistic approach to growth), the graph is masking the production of either consumer or capital goods. Theeconomy at stopover A is prefers producing more consumer goods than capital goods.The economy at Point B is producing more capital goods. Both economies are on the curve C. If the economies at both A and B shift outwards to the curve C1, it will represent that both economies are able to produce more of each product. This clearly demonstrates the benefits of economic growth on production possibilities. Not only are does it enable the more production of each product as a result of more resources used, the economy will be able to satisfy more wants and thus enjoy a higher standard of living. The PPC can also demonstrat e how the economy at Point B is more likely to experience economic growth as the pick of more capital goods produced allowed greater capacity to produce more goods in the future.Using the PPC, it is able to display the different amounts of growth in the various positions and will thus help demonstrate the results. In all, the clear movements of the points from one curve to another visually represent the benefits of economic growth. Production possibility curve are excellent graphs that convey the problems of unemployment, clearly represent the effects of technological change and demonstrate the benefits of economic growth. The movements in graph can show different results and thus can help make decisions on what to produce.