BULANGALIRE BASHOSHERE

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a) Using a graph, What is a Production Possibilities Frontier/Curve?

Let start by defining the ppf concept,
Production possibility frontier is the graph which indicates the various production possibilities
of two commodities when resources are fixed. The production of one commodity can only be
increased by sacrificing the production of the other commodity. It is also called the production
possibility curve or product transformation curve.
The production possibility frontier demonstrates that there are, or should be, limits on
production. An economy, to achieve efficiency, must decide what combination of goods and
services can and should be produced.
This data is of importance to managers seeking to determine the precise mix of goods that
most benefits a company's bottom line.
The PPF curve does not apply to companies that produce three or more products vying for the
same resource.
Let take an example of a business which produces chargers and earphones. When it uses all
of its resources, it can produce 10 chargers and 60 earphones at one point, it’s one of the
possibles output points. Let draw a ppf graph below, y axis is ‘’Chargers ‘’ and x axis is ‘’
earphones’’.
The graph indicate that when the company produce 25 chargers that means that it will not
produce any earphones, that’s is the point A the the graph. Or it can choose any others point of
its production possibility curve accordingly to its limits of resources. So it is like when we give
more resources to chargers production, the resources to give to earphones production must
decrease and vice versa.
We have to come up with the concept ‘’opportunity cost’’ which is the loss of the benefit that
could have been acquired if the best alternative choice was chosen instead.

b) Discuss the shift in the PPF Curve as a result of economic growth

Economics growth is represented by a shift in a production possibility frontier since positive

economic growth would mean that you are able to make more of both goods than you could
before.
At any particular point in time, an economy cannot be outside its production possibility curve.
Over time, however, expanding output potential is possible for an economy. This occurs
through economic growth, which refers to increased productive capabilities of an economy
made possible either an increasing resource base or technological advances.

We can get Economic growth for different reasons.

We have increase of number factors of production. Factors of production are things that go
into the production process such labour,capital, land and entrepreneurship. So if we have
more labour forces we are going to have more production possibilities than we had before.
Another way getting an increase shifting in the production possibility frontier is to get a positive
technology change. We can get more output from the same ressources than we could before.
Investment in new technology increases potential output for all goods and services because
new technology is surely more efficient than old technology.
Another reason is change in production methods, a new method can increase outputs. For
example a bakery which produces bread and cakes a change in method of making breads by
using non electric oven over electrics one can increase the production capacity.

If there is an increase in land, labour or capital or an increase in the productivity of these

factors, then the PPF curve can shift outwards enabling a better trade-off.
As we can see above in the graph, The the possible production line was the black one, the
resources were limited only at the point in the black line. But when the economic growth
occurred, the ppf shifted to another level of production for the 2 products. The new production
possibility frontier is in blue color, it has now a production capability than it has before.