economics

[knight101]

im having problem wid 2 questions...can ny1 explain
Q1. does the concept of oppurtunity cost explain the scarcity of resources?
Q2. explain the features of production possibility curve. Discuss the causes of inwards and outwards shift of production possibility curve?

im new in economics and i need these concepts cleared.... :mrgreen: :mrgreen: :mrgreen:

 

[passion hunter]

you know that basic economic problem of scarcity exists due to never ending wants and limited resources.thus with limited factors of production not all wants can be satisfied and therefore the market forces have to decide which commodities to produce.this leads to opportunity cost,whenever opportunity cost would exist there will always be scarcity.that is because if this condition does not exist resources will be unlimited and all wants can be satisfied.choice would not need to be made..no utility is being forgone

production possibility curve on the other hand shows the various combination of products that can be produced at at a particular time.it shows the limit beyond which an economy cannot go.in the short run when resources are fixed, to increase the production of lets say A commodity production of B would need to be reduced..(we are assuming resources are fixed) .if the graph shows concave curve opportunity cost would be increasing and vice versa in convex one.the shifts in the curve can be related to economic growth., efficiency of labour, technology..etc, .u can do the math.

i hope it clears your doubts

 

[xoraix khan]

question: what is da link between production possibility curve and opprotunity cost??

 

[Xenon]

question: what is da link between production possibility curve and opprotunity cost??

The PPC/PPF, as you know, shows the different combination of two or more goods and/or services that an economy can produce with the best utilization/ most efficient use of its resources. the usual shape of PPC are concave to the origin or the curves are bowed outwards. This shows that as more of one good is produced, the unit of the other good sacrificed or given up increases, in other words, the opportunity cost increases. As more of resources are allocated to the production of one good, the increase in output is smaller and this reflects the principle of diminishing return.

However, if the opportunity cost is constant, the PPC will be a straight line. Again if the opportunity cost is decreasing, the PPC will curve inwards instead of outwards. But these two cases are unlikely to occur. Looking from this point, it can be said that opportunity cost determines the shape of PPC.