The economics
problem.
Production possibilities and opportunity cost
And if we want to increase our production of one
goods, we must decrease our projection of something else we face a trade of.
The production possibilities frontier (PPF) is the
boundary between those coombination of goods and service they can be produce
and those that can’t. to illustrate the PPF,
we focus on two goods at times and hold the quantities produce of all the other
goods and service constant.
Production possibilities frontier
The PPF illustrate scarcity because we can’t attain
the point outside the frontier. This point describe wants that can’t satisfied.
We can produce at any point inside the PPF or on the PPF
The PPF separate
the attainable from the unattainable. Production is possible at any point
inside the arrange area or on the frontier. Points outside the frontier in are
attainable. Points inside the frontier, such as points Z, are inefficient because
resource are loss or miss located. At such point, it is possible to use the
available resources to produce more of other goods or both goods.
Production efficiency
We achieve production efficiency if we produce goods
and services at lowest possible cost. This outcome occurs at all the point on
the PPF. At point inside the PPF production is inefficient because we are
giving up more than necessary of one goods to produce a given quantity of the
other goods. Production is inefficient inside the PPF because resources are
either unused or misallocated, or both. Resources are unused when they idle but
could be working.
Tradeoff along the ppf
tradeoffs arise
in every imaginable real world situation. Fixed amount of labour, land,
capital, and entrepreneurship. By using our available technologies we can
employing these resources to produce goods and services, but we are limited in
what we can produce. This limit defines a boundary between what we can and
can’t attain.
Opportunity cost
The opportunity cost of an action
the highest valued alternative forgone. The PPF make this idea resize and
enable us to calculate opportunity cost. Along the PPF they are only two goods.
Some quantity of the other goods.
OPPORTUNITY COST IS A RATIO
The
opportunity cost ratio decrease in the quantity produce of one goods devided but
the increase by the quantity produce of another goods as we move along the PPF.
INCREASING OPPORTUNITY COST
The outward bow shape of the PPF reflect increasing
opportunity cost. When we produce large quantity between points A and B PPF has
a gentle slope.
The PPF and Marginal Cost
The PPF
determines opportunity cost. The marginal
cost of each good or good of service
is the opportunity cost of producing one more unit
Preference and marginal benefit
The marginal benefit from a goods or
service is the benefit receive from consuming one more unit of it. We measure
the marginal benefit from a good from service by the most that people willing
to pay for an additional unit of it. You are willing to pay less for a good
than it is worth to you, but you are not willing to pay more than it is worth,
and the most you are willing to pay measures marginal benefit.
We illustrate references using the
marginal benefit curves, which is approve that sales the relationship between
the marginal benefit from a goods and the quantity of that goods consume. The
more we have of any goods or service, this smaller is its marginal benefit and
the less we are willing to pay for an additional unit of it. This tendency is
so wide spread, that we call it a principle of decreasing marginal benefit.
The basic reason why the marginal
benefit from a goods or service decrease as we consume more of it is that we
like variety.
Allocate efficiency
At
any point on the PPF, we can’t produce more of one goods without giving up some
other goods. At the best point on the PPF, we can’t produce more of one goods
without giving up some other goods that provides greater benefit. We are
producing at the point allocate efficiency, the point on the PPF that we prefer
above all other point.
Economic growth
Economic growth increase our
standard of living, but it doesn’t over come scarcity and avoid opportunity
cost
The cost economic growth
Economic growth comes from
technological changes is the development of new goods and of better ways of
producing goods and service. The capital accumulation is the growth of capital
resources including human capital. Because of technological change and capital
accumulation we have an enormous quantity of cars and provide us with more
transportation than was available when we had only horses and carriage, we has
satellite that provide global communication on a much larger scale than
available with the earlier cable technology.
A nation economic growth
If a nation devotes all its factor
of production to producing consumption goods and services a none that advancing
technology and accumulating capital its production possibilities in the future
will be the same as they are today.
Comparative advantage and absolute advantage a
person has a comparative adventage offer another in producing a good if he or
she can produce a given quantity of that good a lower opportunity cost tha the
other person. Differences in opportunity cost a rise from differences individual
abilities and from differences in the character stage of other resources.
A comparative
advantages arise from differences in opportunity cost in absolute advantage
arise from different in product difference in production per hour
Dynamic Comparative Advantage
An any given
point in time, the resources an technologies available determine the
comparative advantage that individuals and nation have. Dynamic comparative
advantages is comparative advantages the a person or country has acquired by
specializing in an activity and becoming the lowers cost producer as a result
of learning by doing.
The economic coordination
Two competing
economic coordination system have been used : sample economic planning and
decentralized markets.
To make
decentralized coordination work, four complementary social institutions that
have develop over many centuries are needed. They are
a.)
FIRMS
It
is a economic unit that hires factors of production and organizes those factors
o produce and sell goods and services. Examples of firms are your local petrol
station, Woolworth, and Qantas. This firms coordinate a huge amount of economic
activity, but it firms gets too big, it can’t keep track of all the information
that is needed to coordinate its activities. For this reason, firms themselves
specialize and trade with each other.
b.)
MARKETS
The
word market means a place where people buy and sell goods (fish, meat, fruits,
vegetables, etc). in economics, market has a more general meaning. A market is
any arrangement that enables buyers and sellers to get information and to do
business with each other.
Market
have evolved because they facilitate trade. Without organized markets, we would
miss out on a substantial part of the potential gains from trade.
c.)
PROPERTY
RIGHTS
The
social arrangement that govern the ownership, use, and disposal of anything
that people value are called property rights.
d.)
MONEY
It’s
a any commodity or token that is generally acceptable as a means a
payment.
and this came with the PPTX style mode, i put link to the scribd.com so you can download it and the link to my PPTX post on my blog.
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