What sphinx of cement and aluminum bashed open their skulls and ate up their brains and imagination? Ashcans and unobtainable dollars! Children screaming under the stairways! Boys sobbing in armies!
Here, we turn to more macroeconomic matters that occur on the Change along the production possibility curve economics essay of national economies.
There are just enough apple orchards producing apples, just enough car factories making cars, and just enough accountants offering tax services. If the economy is not producing the quantities indicated by the PPF, resources are being managed inefficiently and the stability of the economy will dwindle.
The production possibility frontier shows us that there are limits to production, so an economy, to achieve efficiency, must decide what combination of goods and services can and should be produced. Imagine an economy that can produce only two things: For instance, producing 5 units of wine and 5 units of cotton point B is just as desirable as producing 3 units of wine and 7 units of cotton.
Point X represents an inefficient use of resources, while point Y represents the goals that the economy simply cannot attain with its present levels of resources. As we can see, in order for this economy to produce more wine, it must give up some of the resources it is currently using to produce cotton point A.
If the economy starts producing more cotton represented by points B and Cit would need to divert resources from making wine and, consequently, it will produce less wine than it is producing at point A. As the figure shows, by moving production from point A to B, the economy must decrease wine production by a small amount in comparison to the increase in cotton output.
However, if the economy moves from point B to C, wine output will be significantly reduced while the increase in cotton will be quite small.
Keep in mind that A, B, and C all represent the most efficient allocation of resources for the economy; the nation must decide how to achieve the PPF and which combination to use.
If more wine is in demand, the cost of increasing its output is proportional to the cost of decreasing cotton production.
Markets play an important role in telling the economy what the PPF ought to look like. Consider point X on the figure above. On the other hand, point Y, as we mentioned above, represents an output level that is currently unattainable by this economy. But, if there were a change in technology while the level of land, labor and capital remained the same, the time required to pick cotton and grapes would be reduced.
Output would increase, and the PPF would be pushed outwards. A new curve, represented in the figure below on which Y would fall, would then represent the new efficient allocation of resources.
When the PPF shifts outwards, we can imply that there has been growth in an economy. Alternatively, when the PPF shifts inwards it indicates that the economy is shrinking due to a failure in its allocation of resources and optimal production capability. A shrinking economy could be a result of a decrease in supplies or a deficiency in technology.
An economy can only be producing on the PPF curve in theory; in reality, economies constantly struggle to reach an optimal production capacity. And because scarcity forces an economy to forgo some choice in favor of others, the slope of the PPF will always be negative; if production of product A increases then production of product B will have to decrease accordingly.
Trade, Comparative Advantage and Absolute Advantage Specialization and Comparative Advantage An economy may be able to produce for itself all of the goods and services it needs to function using the PPF as a guide, but this may actually lead to an overall inefficient allocation of resources and hinder future growth — when considering the benefits of trade.
Through specializationa country can concentrate on the production of just a few things that it can do best, rather than dividing up its resources among everything. Let us consider a hypothetical world that has just two countries Country A and Country B and only two products cars and cotton.
Suppose that Country A has very little fertile land and an abundance of steel available for car production.
Country B, on the other hand, has an abundance of fertile land but very little steel. If Country A were to try to produce both cars and cotton, it would need to divide up its resources, and since it requires a great deal of effort to produce cotton by irrigating its land, Country A would have to sacrifice producing cars — which it is much more capable of doing.A newly released study, produced with help from eight universities, found some good news.
Between and , the global impact of human activities on the terrestrial environment is expanding more slowly than the rates of economic and/or population growth. The Levy Economics Institute of Bard College is a non-profit, nonpartisan, public policy think tank.
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[ These are my notes from this book about how we went from an organic sustainable economy to a temporary fossil-fueled one. It’s one of the few books I’ve found that explains what life was like before fossil fuels in a biophysical way that focuses on energy and population.