Examples of production possibilities curve in the following topics:
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- The circular flow of income can also be analyzed using the production possibility frontier (PPF).
- The graph shows the maximum possible production level of one commodity for any production level of the other, based on the state of technology.
- A point of the frontier line indicates the efficient use of available inputs, while a point beneath the curve shows inefficiency.
- The graph illustrates a typical production possibilities frontier curve.
- State the function of the circular flow diagram and the production possibilities frontier
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- Productive efficiency occurs when production of a good is achieved at the lowest resource cost possible, given the level of production of other goods.
- The concept is illustrated on a production possibility frontier (PPF) where all points on the curve are points of maximum productive efficiency (i.e., no more output can be achieved from the given inputs).
- In long-run equilibrium for perfectly competitive markets, productive efficiency occurs at the base of the average total cost curve, or where marginal cost equals average total cost.
- This chart shows production possibilities for production of guns and butter.
- Point X is only possible if the means of production improve.
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- Technological change is a term used to describe any change in the set of feasible production possibilities.
- For the economy as a whole, an improvement in technology shifts the production possibilities frontier outward .
- Supply of these goods increased, and the production possibilities curve for the entire economy shifted outwards.
- Technological change in the computer industry has resulting in a shift of the computer supply curve.
- Producers respond to the cheaper production process by increasing output, shifting the supply curve outwards.
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- During the short-run, firms possess one fixed factor of production (usually capital).
- It is possible for the curve to shift outward in the short-run, which results in increased output and real GDP at a given price.
- The short-run aggregate supply curve is an upward slope.
- The short-run is when all production occurs in real time.
- The long-run supply curve is static and shifts the slowest of all three ranges of the supply curve.
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- An alternate model explains that the AS curve increases because some nominal input prices are fixed in the short-run and as output rises, more production processes encounter bottlenecks.
- In this case, the AS curve is flat.
- Any increase in demand production causes the prices to increase which results in a steep or vertical AS curve.
- It is possible for the short-run supply curve to shift outward as a result of an increase in output and real GDP at a given price .
- This graph shows the aggregate supply curve.
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- A production-possibility frontier (PPF) graphs the combinations for the production of two commodities with which the same amounts are used.
- Within a market system, economists use the production possibility frontier (PPF) to graph the combinations of the amounts of two commodities that can be produced using the same amount of each factor of production.
- If a point on the graph is above the curve it indicates efficiency, while a point below the curve signifies inefficiency.
- PPF graphs help economists study the current state of production as well as possible production scenarios.
- Explain the benefits of trade and exchange using the production possibilities frontier (PPF)
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- These indifference curves, when mapped graphically alongside other curves, is called an indifference map.
- While it is possible to create a complex array of preference maps to compare more than two products/services, each specific standard indifference map will be about creating a benchmark between two.
- Perfect Substitutes: To understand what a indifference curves will look like when products are perfect substitutes, please see .
- The comparison between the goods demonstrates the relative utility one has compared to another, and the way in which consumers will act when posed with a decision between various products and services.
- A consumer will be just as happy with any combination of Good X and Y on indifference curve I1, though s/he will prefer any bundle on indifference curve I2 or I3.
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- The production possibility frontier shows the combinations of output that could be produced using available inputs.
- It shows the maximum possible production level of one commodity for any production level of another, given the existing levels of the factors of production and the state of technology.
- In this instance, the production possibilities frontier is also the consumption possibilities frontier.
- Trade enables consumption outside the production possibility frontier.
- Explain the benefits of trade and exchange using the production possibilities frontier (PPF)
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- It gives the amounts of goods and services that will be demanded at all possible price levels, which, unless there are shortages, is equivalent to GDP.
- An increase in any of the components of aggregate demand shifts the AD curve to the right.
- When the AD curve shifts to the right it increases the level of production and the average price level.
- The aggregate demand curve shifts to the right as a result of monetary expansion.
- Likewise, if the monetary supply decreases, the demand curve will shift to the left.
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- This brings us to the aggregate demand curve.
- It specifies the amounts of goods and services that will be purchased at all possible price levels.
- This is the demand for the gross domestic product of a country.
- The decrease in the money supply is mirrored by an equal decrease in the nominal output, otherwise known as Gross Domestic Product (GDP).
- The increase in the money supply is mirrored by an equal increase in nominal output, or Gross Domestic Product (GDP).