Tourism and Hospitality

FOE_C02.qxd 1/15/07 14:45 Page 16 »2 The productionion guess bourne (curve): the PPF or PPC The starting point in our stinting analysis is to consider what an miserliness can pose. As consumers we may want many things, notwithstanding there is a influence to what our delivery can actu every(prenominal)y produce. This can be analysed using the production incident frontier (PPF). In this unit we watch the factors that determine how much an deliverance can produce and the implications of assorted output decisions. LEARNING OBJECTIVES By the end of this unit you should be able to: ? understand what is meant by a production gap frontier; ? analyse the shape and the position of the production possibility frontier; ? understand the concept of productive ef?ciency. ? Scarcity and choice In Unit 1 we saw how the study of economics was establish around the issue of scarcity and choice. As consumers our wants are unlimited, but there is a limit to what an economy can produce because of a scarcity of resources. As consumers and voters we are, of course, interested in what an economy can produce. What an economy is capable of producing can be shown on a production possibility frontier. ? The production possibility frontier (PPF) The production possibility frontier or curve (PPF or PPC) shows the maximum output that can be produced in an economy at any given moment, given the resources available.

If an economy is full utilising its resources then it will be producing on the PPF. To keep FOE_C02.qxd 1/15/07 14:45 Page 17 2: The production possibility frontier » 17 merchandise A (units) Q0 Q1 X Q3 0 Y Q2 Q4 Q5 Product B (units) Figure 2.1 Transferring resources out of producing product A into producing product B. our analysis simple we consider an economy that produces only two products, A and B (see Fig. 2.1). Imagine that all of an economys resources, such as land, labour and capital, were utilise in industry A. Then Q0 of A would be... If you want to go away a full essay, order it on our website: Orderessay

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