Reduction in the labour unemployment rate will not result in a rightward shift of the production possibility frontier as supply of resources and technology is constant and only the supply of labour will be increased which indicates that according to law of variable proportion, the production will initially rise but …

Production possibilities, which analyzes the alternative combinations of two goods that an economy can produce with given resources and technology, indicates unemployment when production is inside the production possibilities curve. Unemployment means resources that could be used for production are not being used.

Production Possibility Frontier (PPF or PPC) PPF is the curve that shows the best (maximum) combinations of two outputs that an economy can produce given three assumptions: 1) Technology is fixed; 2) Resources are fixed; and 3) Resources are used at their fullest. All points inside PPF are inefficient points.

Why is a production possibilities frontier typically drawn as a curve, rather than a straight line? Some inputs are better suited to one area of production than another. As these are diverted towards less efficient uses, some amount of production is lost, causing the PPF to bend.

The curve bows outwards because of the Law of Increasing Opportunity Cost, which states that the amount of a good which has to be sacrificed for each additional unit of another good is more than was sacrificed for the previous unit.

If production possibility curve is a straight vertical line/linear it means that MRT is constant that is same amount of a commodity is sacrificed to gain an additional unit of another commodity. This means that the opportunity cost is constant.

When a production possibilities frontier is bowed outward, the opportunity cost of the second good in terms of the first good is higher when the economy is producing much of the second good and little of the first good than it is when the economy is producing little of the second good and much of the first good. 67.

Key Insights. The production possibilities frontier shows the combinations of goods and services that can be produced efficiently in an economy at a point in time. The production possibilities frontier is downward sloping: producing more of one good requires producing less of others.

The curve measures the trade-off between producing one good versus another. For example, say an economy can produce 20,000 oranges and 120,000 apples. If it wants to produce more oranges, it must produce fewer apples. On the chart, Point C shows that if it produces 45,000 oranges, it can only produce 85,000 apples.

The production possibility curve represents graphically alternative production possibilities open to an economy. The productive resources of the community can be used for the production of various alternative goods. But since they are scarce, a choice has to be made between the alternative goods that can be produced.

In other words, production possibility curve can be defined as a graph that represents different combinations of quantities of two goods that can be produced by an economy under the condition of limited available resources. …

The factors of production include land, labor, entrepreneurship, and capital.

Terms in this set (6)

• natural resources. everything that is made of natural materials.
• raw materials. any good used in manufactoring other goods.
• labour. all physical and mental work needed to produce goods or services.
• capital.
• information.
• entrepreneurship.

This circular flow is described below in Figure 1, which illustrates the dual roles of households and businesses: Households not only provide factors of production (or resources) but also consume goods and services. Businesses not only buy resources but also produce and sell both goods and services.

government

In a capitalist society, the bourgeoisie, or the capitalist class, is the class that owns the means of production and derives a passive income from their operation. Examples of capitalist class include business owners, shareholders and the minority of people who own factories, machineries and lands.

The social relations of socialism are characterized by the proletariat effectively controlling the means of production, either through cooperative enterprises or by public ownership or private artisanal tools and self-management.

Generally, socialism means common ownership of the means of production (which means ownership of all labor, hence ownership of all workers) as well as management by whomever or whatever rules the state. If the workers control the state, then workers control the means of production.

Socialism is a political, social, and economic philosophy encompassing a range of economic and social systems characterised by social ownership of the means of production. Social ownership can be public, collective, cooperative, or of equity.

The means of production are the actual objects that one needs to own in order to be able to produce goods. Capital within our society can purchase all, and can do anything, and can make any decision: money is the only true sovereign in a capitalist society. …

Workers’ control is participation in the management of factories and other commercial enterprises by the people who work there. Workers’ councils are a form of workers’ control. Council communism, such as in the early Soviet Union, advocates workers’ control through workers’ councils and factory committees.