What you need to know is that:Ī scarce resource is one that runs out, no matter how much of that resource there acually is. Statements of fact or description of how something actually is.ĭon´t worry about not understanding it right now, many adults have trouble understanding it. Statements that describe opinions or how things ought to be. The logical principle that states you should make no more assumptions than the minimum amount needed to perform analysis in economics, we use the concept of Occam's razor when we invoke the ceteris paribus assumption.Ī Latin phrase essentially meaning "all else equal", which is used in economics to emphasize the idea that the only changes you should be thinking about are the ones that are explicitly described for example, if we are talking about how someone reacts to a change in the price of a good, you should assume the only thing changing is price and not preferences, income, or anything else. (sometimes called entrepreneurship) The ability to combine the other productive resources into goods and services. Examples of capital would be machinery, technology, and tools such as computers hammers factories robots trucks, and trains used to transport goods and other equipment employed in the production of a good or service. ![]() Physical goods that are produced and used to produce other goods. Some examples are the number of workers and number of hours worked. ![]() Work effort used in the production of goods and services. Some examples of land are lumber, raw materials, fish, soil, minerals, and energy resources. Natural resources that are used in the production of goods and services. Technology is sometimes referred to as entrepreneurship. ![]() There are four economic resources: land, labor, capital, and technology. Things that are inputs to production of goods and services. Summary Definitionĭefine Production Possibility Curve: PPC is a graphical representation of the number of products a company can produce if it uses all of its resources to produce two products.The fact that there is a limited amount of resources to satisfy unlimited wants The opportunity cost for producing 1,500 units of pencils becomes the 300 units of forgone pens. The company has recently received more demand for pencils, so management decided to increase the production of pencils from 1,000 units to 1,500 units by reducing the output of pens from 800 units to 5oo units. Currently, it is producing 1,000 pencils and 800 pens. Likewise, it can produce 1,500 pens if it doesn’t produce a single pencil. The company can produce 2,000 pencils if it doesn’t produce a single pen. Their resources for producing the two products are fixed. XYZ Company, Ltd is known for producing and selling pens and pencils. This means that the output of product A can only increase if the output of product B decreases.Īnother assumption is that technological advances and production improvements are fixed. One key assumption the PPC makes is that all resources for production are fixed. Any point below the curve represents a production level that isn’t using 100 percent of the company’s resources. Any point above the curve is unattainable with the given amount of company resources. As the company diverts more resources to producing product B, the production of product A will decrease. This downward sloping line represents the trade off between producing product A and product B. The curve is drawn to represent the number of goods that can be produced using limited resources and a halt in technology at each point. Thus, one product’s maximum production possibilities are plotted on the X-axis and the other on the Y-axis. The graph shows the maximum number of units that a company can produce if it uses all of its resources efficiently. Management uses this graph to decide the ideal ratio of units to produce to minimize cost and waste while maximizing profits. What is the definition of production possibility curve? In business, the PPC is used to measure the efficiency of a production system when two products are being produced together. ![]() What Does Production Possibilities Curve Mean? Definition: The Production Possibilities Curve, also known as the production possibilities frontier, is a graph that shows the maximum number of possible units a company can produce if it only produces two products using all of its resources efficiently.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |