- When resources are shifted from making one good/service to another.
- The cost of producing the second item increases.
- Occurs because not all resources are equally suited for the production of all goods and services.
4 keys assumption of the possibility graph.
- Only 2 products can be produced.
- Full employment of resources.
- Fixed resources - Land, labor, and capital.
- Fixed technology.
Production Possibility Graph
Point A- Inside the curve, attainable but inefficient. Caused by war, famine, and unemployment.
Point D - Outside the curve, unattainable. Caused by technology and economic growth.
Your explanations of Point A, B&C and point D were very thorough but I think you should provide examples of each point for clarity and to use as a reference.
ReplyDeleteFor Point A: The example can be a short staffed Walmart during Black Friday. The demand would have have been high meaning more customers, but not allocating enough employees mean its attainable (sales will be made) but it is inefficient (slow pace). This may fall under the category of unemployment.
Point B: All resources and goods are being put to use so there is not shortage or surplus.
Point C: Google glasses (a technological innovation) is for the future because drivers today are not equipped to scan the internet with their lenses while driving. Other changes have to be made first.
Hope this helps!