Microeconomics

Section A Question a): Describe production possibility barrier (PPF)? Then, using PPF, explain the law of diminishing return. Answer : In  frugals, a production-possibility frontier (PPF), sometimes called a production-possibility curve, the intersection Possibilities Frontier (PPF) shows the maximal combinations of two goods that croup be produced during a specific time period apt(p) fixed resources and technology and making full and ability use of available means resources. The PPF shows the maximum amount of one commodity that can be obtained for any stipulate production level of the other commodity, given the societys technology and the amount of factors of production available. A PPF can be used to demonstrate a number of frugal concepts, such as scarcity of resources, opportunity salute, productive efficiency and the marginal rate of transformation. In addition, an outward shift of the PPF illustrates economic growth, which means that more of both  output signals can be produced during the specified period of time without reducing the output of either good. The chart below shows that increasing in the opportunity cost. [pic] Graph 1.1 preceding(prenominal) shows on common PPF graph (An increasing of opportunity cost) From the Figure 1.

1, combinations of output of DVD and MP3 player lying inside the PPF occur when at that place are unemployed resources or when the economy uses resources inefficiently, point D is an example of this. We could increase total output by mournful towards the production possibility frontier and reaching any of points A, B or C. Point E is unattainable at the minute of arc because it lies beyond the PPF. If there is an increase in factor resources or efficiency in factor resource or betterment of technology, we achieve this then output combination, point E whitethorn become attainable. With varying returns to scale, the PPF would appear inverted; with opportunity cost falling as more is produced of either product. This is caused by the... If you command to get a full essay, order it on our website: Orderessay

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