The paper 'Productivity Possibilities Frontier" is a good example of macro and microeconomics coursework. The Production Possibilities Frontier framework is useful for illustrating and working with economic concepts. Scarcity, the situation where the resources are scarce and cannot satisfy the needs and the wants, is finitely portrayed by the PPF. The PPF will be used to point the instances where the production is expected to rise or to be at its optimal. The PPF normally consists of two points, the attainable point, which includes the curve itself and the region below it and the unattainable which includes the points above the PPF.
Scarcity is concerned with the attainable and the unattainable. The attainable is to be found on the lower side and the curve itself and the unattainable which are the things which are found on top of the PPF. In the diagram below, points A-F is attainable while point G is unattainable. Opportunity cost and the choice is also seen in the same figure. In the attainable region, the users must choose the combination of the goods they want to produce. There are many choices available in the figure.
In an analysis of the figure, points A and points B will be analysed. One must choose only one point. No two points will be chosen. Opportunity cost illustrates that as we move from one region to another, there are some goods we will choose over others. If we are at point A and choose to move to point B, and there are 55000 television sets and 5000 cars in point A and point B has 50000 television sets and 15000 cars, in essence, the opportunity cost will be 1 car is ½ television sets. The Production Possibilities Frontier has been effectively used to show the way two goods can be produced at their maximal combinations at any given time using fixed resources and technology and having the fullest use of available resources.
The graphical representation of this economic measure is a concave which curves outside because one increase in a resource may lead to their fall because of the law of diminishing returns. An example is that if we require increased output from the human resource, there should be re-training of the staff which will mean that more financial resources will be allocated to this new move.
There should be additional overhead to this. An example is that of a shop which is concerned with selling DVD players and MP3 players from a given constant stock of labor and cost. These two combinations are possible within the PPF but the problem is that there is underutilization of resources or where the resources are not used to their fullest potential. For those goods that lie along the PPF, they are feasible and they can be produced to their fullest potential.
In the graph that is shown above, the combination that is shown in point E is not attained because the resources that are being used currently is not optimal enough (Baumol, & Blinder, 2008). Production Possibilities Frontier Shifts There are situations where the PPF will shift. One of these situations is when there is improved productivity and efficiency; this could be because there are new technology and new techniques of production introduced. Another reason for the shift in the PPF is when there is an increased workforce thus increasing the production output.
This will increase the total effort that is applied to a particular task. There could also be a shift due to an increase in the capital. In the graph that follows the production of MP3 is affected due to the introduction of new technology; this causes an outward shift in the PPF curve. In real life situation, the cost of MP3 will be reduced because there is a change in opportunity cost. With the same resources being allocated to the other commodity, DVDs, the same effect will be experienced in MP3.
McEachern, W 2008, Economics: A contemporary introduction, Cengage Learning, Michigan.
Cypher, J & Dietz, J 2008, The process of economic development, Taylor & Francis, New York.
Baumol, W & Blinder, A 2008, Economics: Principles and policy, Cengage Learning, Michigan.
Sato, R & Suzawa, G 1983, Research and productivity: endogenous technical change, Michigan University, Michigan.