The Economic Problem by bobby on Scribd

the economic problem

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.

pptx post on my blog

PPTX on scribd download it while it's hot