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- Production possibilities frontier
- Efficiency
- Opportunity cost
Division of labourDivision of labour is the specialization of cooperative labour in specific, circumscribed tasks and like roles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialization processes. Division of labour was also a method used by the Sumerians to categorize different jobs, and divide them to skilled members of a society. 
Production possibilities frontierIn economics, a production–possibility curve (PPC), sometimes called a production–possibility frontier, production-possibility boundary or product transformation curve, is a graph that compares the production rates of two commodities that use the same fixed total of the factors of production. Graphically bounding the production set, the PPF curve shows the maximum specified production level of one commodity that results given the production level of the other. By doing so, it defines productive efficiency in the context of that production set. A period of time is specified as well as the production technologies. The commodity compared can either be a good or a service. PPFs are normally drawn as bulging upwards ("concave") from the origin but can also be represented as bulging downward or linear (straight), depending on a number of factors. A PPF can be used to represent a number of economic concepts, such as scarcity of resources (i.e., the fundamental economic problem all societies face), opportunity cost (or marginal rate of transformation), productive efficiency, allocative efficiency, and economies of scale. In addition, an outward shift of the PPF results from growth of the availability of inputs such as physical capital or labour, or technological progress in our knowledge of how to transform inputs into outputs. Such a shift allows economic growth of an economy already operating at its full productivity (on the PPF), which means that more of both outputs can be produced during the specified period of time without sacrificing the output of either good. Conversely, the PPF will shift inward if the labour force shrinks, the supply of raw materials is depleted, or a natural disaster decreases the stock of physical capital. However, most economic contractions reflect not that less can be produced, but that the economy has started operating below the frontier—typically both labour and physical capital are underemployed. The combination represented by the point on the PPF where an economy operates shows the priorities or choices of the economy, such as the choice between producing more capital goods and fewer consumer goods, or vice versa. Efficiency
An example PPF with illustrative points marked A PPF shows all possible combinations of two goods that can be produced simultaneously during a given period of time, ceteris paribus. Commonly, it takes the form of the curve on the right. For an economy to increase the quantity of one good produced, production of the other good must be sacrificed. Here, butter production must be sacrificed in order to produce more guns. PPFs represent how much of the latter must be sacrificed for a given increase in production of the former. Such a two-good world is a theoretical simplification, due to the difficulty of graphical analysis of multiple goods. If we are interested in one good, a composite score of the other goods can be generated using different techniques. Furthermore, the production model can be generalized using higher-dimensional techniques such as Principal Component Analysis (PCA) and others. For example, assume that the supply of the economy's factors of production does not change over time, in order to produce more butter, producing "guns" needs to be sacrificed. If production is efficient, the economy can choose between combinations (i.e. points) on the PPF: B if guns are of interest, C if more butter is needed, D if an equal mix of butter and guns is required. In the PPF, all points on the curve are points of maximum productive efficiency (i.e., no more output can be achieved from the given inputs); all points inside the frontier (such as A) can be produced but productively inefficient; all points outside the curve (such as X) cannot be produced with the given, existing resources. Not all points on the curve are Pareto efficient, however; only in the case where the marginal rate of transformation is equal to all consumers' marginal rate of substitution and hence equal to the ratio of prices will it be impossible to find any trade that will make no consumer worse off. Opportunity cost
Increasing butter from A to B carries little opportunity cost, but for C to D the cost is great. If there is no increase in productive resources, increasing production of a first good entails decreasing production of a second, because resources must be transferred to the first and away from the second. Points along the curve describe the trade-off between the goods. The sacrifice in the production of the second good is called the opportunity cost (because increasing production of the first good entails losing the opportunity to produce some amount of the second). Opportunity cost is measured in the number of units of the second good forgone for one or more units of the first good. In the context of a PPF, opportunity cost is directly related to the shape of the curve (see below). If the shape of the PPF curve is straight-line, the opportunity cost is constant as production of different goods is changing. But, opportunity cost usually will vary depending on the start and end point. In the diagram on the right, producing 10 more packets of butter, at a low level of butter production, costs the opportunity of 5 guns (as with a movement from A to B). At point C, the economy is already close to its maximum potential butter output. To produce 10 more packets of butter, 50 guns must be sacrificed (as with a movement from C to D). The ratio of opportunity costs is determined by the marginal rate of transformation. Directory: forms forms -> Form a-122 File No. Retirement homes act, 2010 application under section 116 of the act forms -> Course overview forms -> Pre-matric scholarship for students belonging to the minority communities forms -> Cutting Greenhouse Gases Global warming forms -> Bowl game blarney: Why Sports Tourism Trumps Logic in the Quest for a true College Football Champion in the United States” Prepared for: Dr. Tom Hinch Reviewed by: Tim Enger 0845772 Due Date: December 10, 2005 Word Count: 6,677 forms -> Steven m. Glassman forms -> Teresa k. Blodgett forms -> Atlanta Falcons Internet Scavenger Hunt forms -> Registration information forms -> Chapter 8 seaman to admiral-21 (sta-21) program Download 7.78 Mb. Share with your friends:
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