Production possibilities curve (PPC)

DEFINIITION of PPC:
MAXIMUM combination on goods that can be produced given the available FOP and the available TOP(Technology of Production)

Purpose
-understand the concept of scarcity & constrained choice
-emphasize distinction between movements along a PPC & shifts the PPC
-show concept of opportunity cost using PPC model

3 Assumptions
-two goods will be produced
-technology unchange
-full employment

Attainable & Unattainable combination

1) Attainable & efficient combination
   -best possible combination
   -fully utilized
   -full employment level
   -firm is efficient
2)Attainable but not efficient
   -it can be produced
   -but economy not efficient
   -not fully utilized resources(unemployment exist)
3)Not attainable
   -not attainable as it is outside PPC
   -not enough resources
   -no new technology
4)Extreme combination
   -all resources only produce one goods

Change in PPC
 a) Increasing in population




 
 -Manufacturers will increase the volume of goods when there is an increase in population
 -Production of both goods will increase
 -Causes PPC to shift to right

 b) Technology progress

 -Technology progress only happened in producing ovens
 -Economy will produce more ovens compare tortillas
 -PPC shifted outwards horizontal axis

Factor of Production (FOP)

Bismillahirahmanirahim.

There are FOUR FACTORS of production that used in production process order to produce economic goods and services.


LAND-It is free gift of natures and the value based on quality and location. The most important, it is a major of resources .

 

 

 LABOUR-The services contributed by human that involved mental and physical process include the skill and unskillful.

CAPITAL-Human made resources to produce other  goods and services. The return to the capital is interest

ENTREPRENEURSHIP-Those who are can manage their firm to produce the goods and services. They are also willing to take risks and organize the other factors production

Economics Issues

INTRODUCTION : ECONOMICS ISSUES

 

DEFINITION OF ECONOMICS

Field of social science that studies the behaviour of individuals and society in the distribution and allocation of limited factors of production

 DIFFERENCES BETWEEN MICROECONOMICS & MACROECONOMICS

 

MICROECONOMICS	MACROECONOMICS
Study of small economic units	About the whole of economy issue in the country
Demand and supply in individual markets	Monetry/fiscal policy
Individual consumer behaviour	Reasons for inflation and unemployment
Individual labour markets-Demand for labour and wages	Economic growth and government borrowing

 POSITIVE VERSUS NORMATIVE ECONOMICS STATEMENT

POSITIVE ECONOMY STATEMENT	NORMATIVE ECONOMY STATEMENT
Based on facts and not value judgement.It also can be tested and verified.	Based on value judgement and on personal opinion.It cannot be tested.
Example;Government provided healthcare increases public expenditure.	Example;Government should provide basic healthcare to all citizens.

BASIC ECONOMICS CONCEPTS
SCARCITY	Lack of resources to produce unlimited demand
CHOICE	Decision that must be make by the firm to produce all product at the same time
OPPORTUNITY COST	Second class thing which is the second class thing will be forgone to get the best alternative

EXAMPLES DUE TO THE BASIC ECONOMIC CONCEPTS

Aza has RM5 and she would like to buy 2 things : a book and a pen which cost RM5 each (unlimited wants and limited sources).Aza has to choose either to purchase a book or a pen which would satisfy her needs(choices).If Aza chooses the book,then the pen is the opportunity cost because it is the second best alternative which she has to forgone.

BASIC ECONOMICS PROBLEMS
WHAT to produces	-Concerned with goods and services will be produces. -Firms will produces goods based on demand of the goods and the goods must give maximum utility.
HOW much to produces	-Decide how many quantity of the product should be produces. -Must based on total demand for the goods.
HOW to produces	-How the goods will be produced for the firm to make the decision.
For WHOM to produces	-The target market to sell the product. -Goods are distributing base on income of people.