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LoginProduction Possibility Curve(PPC) in H2 Econs
10 posts
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i dont really understand this whole PPC thingy and how it works. on what occasion does the PPC shift outwards or inwards? and what do the points on and within the PPC indicate? and also why is it that when resources(e.g. labour, land) are not fully and efficiently used, then there will be unemployment?
Edited by deja_vu88 15 Mar `08, 3:02PM
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The PPC represents the maximum possible output that an economy can come out with at a certain point in time.
Points on PPC indicates that resources are used most efficiently and thus the economy is producing at its maximum. Within the PPC, resources are not used as efficiently. Unemployment can be considered a type of inefficiency because it constitutes a resource that is not fully used. Points outside the PPC are impossible for an economy to achieve.
PPC shift outwards when there are more resources into the economy in the long run (eg population growth, etc). It can also shift outwards when technology makes the usage of resources more efficient (eg computer). Shift inwards will be bad... cuz it will represent the opposite
At A levels, the PPC curve you draw is normally for 2 variables (simplified). A 3 variable curve will be 3D. In actual fact, there are many more things an economy can produce.
For the simplified PPC that you draw, points on the PPC curve line can also be viewed as an opportunity cost curve; they are similar.
Hope it helps.
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the high opportunity cost is the amount he will lose as a result of his not-so-pro at growing crops.. basically its just trying to say a computer engineer has erm lets say 20 hrs.. this 20 hrs he can make 10 computers for $10000 OR he can use this 20 hours to grow 10 kg of crops and earn only $5000.. but by some funny reason if he chooses to grow 10kg of crops, he will not have used that 20 hours to make 10 computers.. then his opportunity cost is $10000(from what he COULD have earned) minus 5000(from selling his crops) = $5000..
i apologize if my explanation not as clear or professional as eagle's.. my explanation appeal more to layman lol..
anyway i took econs for 1 sem nia n is B+..=( so eagle can double confirm? lol.. but i think my understanding of opportunity cost shouldn't be that wrong..
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Originally posted by purpledragon84:
the high opportunity cost is the amount he will lose as a result of his not-so-pro at growing crops.. basically its just trying to say a computer engineer has erm lets say 20 hrs.. this 20 hrs he can make 10 computers for $10000 OR he can use this 20 hours to grow 10 kg of crops and earn only $5000.. but by some funny reason if he chooses to grow 10kg of crops, he will not have used that 20 hours to make 10 computers.. then his opportunity cost is $10000(from what he COULD have earned) minus 5000(from selling his crops) = $5000..
i apologize if my explanation not as clear or professional as eagle's.. my explanation appeal more to layman lol..
anyway i took econs for 1 sem nia n is B+..=( so eagle can double confirm? lol.. but i think my understanding of opportunity cost shouldn't be that wrong..
i thought that the opportunity cost is $10000 from his choice of not making 10 computers? do i have to minus $5000 from $10000 to calculate opp cost ?Edited by deja_vu88 16 Mar `08, 9:37AM
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Before you understand the concept of the PPC, you must know what is opportunity cost. The definition of opportunity cost (afaik) is the value of the next highest-valued alternative forgone in the consumption of a good. What you said in your post in terms of high opportunity cost is not really very accurate. Opportunity cost is a relative concept, there needs to be a basis of comparision between 2 or more things.
Using your computer engineer example, let us say that in 1 day an engineer can make 5 computers OR grow 20 apples. The opportunity cost of producing 1 computer would then be 4 apples while the opportunity cost of growing 1 apple would be 1/4 a computer. Now obviously he would earn more selling 1 computer than he would selling 4 apples. What they meant in that case is that by growing apples, the engineer is actually earning less than he could if he chose to make computers.
Correct me if I'm wrong, but my economics is a little rusty there, lol.
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