Summary by :
Syofiatin Syamsiyah (120720140010)
An easy and simple analogy example “scream energy and sushi production” provided in
Monster Inc. movie, explains production of two outputs based on concepts in
economics. The monsters need capital goods used in production to produce their energy resources (scream energy) and food (sushi) as consumer goods. In order to reach the maximum production based on the quantity of resources they have, they must manage those resources efficiently. One of solutions they have done is by creating a new laughing machine which can generate more energy.
Production Possibility Frontier
(PPF) sometimes called a Production Possibility Curve (PPC), Production Possibility Boundary or Product Transformation Curve, is a graph representing the
combination of two goods that can be produced with fixed quantities of inputs
such as labor, capital, land etc.
PPF defines productive efficiency in the context of production set. A point on the frontier indicates efficient use of the available inputs,
while a point beneath the curve indicates inefficiency. In addition,
any point outside the curve shows unattainable output with the current level of
resources.
Any point along PPF is also called Pareto Efficiency, which has two useful functions :
1. It can be an objective for economy because it can set a direction of economy movement
2. It can help the imperfections or rigidities that exist in an economy and prevent Pareto efficiency being achieved
Any point along PPF is also called Pareto Efficiency, which has two useful functions :
1. It can be an objective for economy because it can set a direction of economy movement
2. It can help the imperfections or rigidities that exist in an economy and prevent Pareto efficiency being achieved
A movement
along PPF, shows the different combinations of outputs which can be produced
with given resources in the most efficient way with the best priorities or
choices of the economy. An outward
shift representing an improvement in economic efficiency is influenced by growth
or availability
of inputs such as capital and new technology, while an inward shift describing
inefficiency is caused by depletion of raw material, natural disaster or shrink
of workforce.
Source :
http://tutor2u.net/economics/revision-notes/as-markets-production-possibility-frontier.html(acessed 30/08/2014)
(acessed 30/08/2014)
http://www.economicsonline.co.uk/Competitive_markets/Production_possibility_frontiers.html
(acessed 31/08/2014)
Labels: Microeconomics
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