ZURONI MD JUSOH

A2-16
JPSPP, FACULTY OF HUMAN ECOLOGY
OBJECTIVES
ECONOMIC PROBLEMS
(SCARCITY)
Eg. Land, labor,
capital)

(CHOICE)

(OPPORTUNITY
COST)
SCARCITY
Caused by
Unlimited wants
Resources limited
What we should do?
Make an efficient choice
Method to overcome
Less our wants or needs
Use the products efficiently
Get more resources
Improve the use of resources
CHOICE
Caused by
Scarcity problem

What we should do?

Make the best choice among others.
OPPORTUNITY COST
Definition the cost expressed in terms of the next
best alternative sacrificed
Helps us view the true cost of decision making
Implies valuing different choices
Decisions require comparing costs and benefits of
alternatives.
Whether to go to college or to work?
Whether to study or go out on a date?
Whether to go to class or sleep in?
 PRODUCTION POSSIBILITY CURVE (PPC)
HOW MUCH THE PRODUCTION CAN BE PRODUCED BY
ECONOMIC IF ALL OF RESOURCES EFFICEINTLY USED.
DEFINITION KNOWN AS TRANSORMATION FUNCTION.

PRODUCE 2 TYPE OF PRODUCTS

LIMITED IN FOP
TECHNOLOGY LEVEL IS FIXED
SHORT TERM PERIOD
ASSUMPTIONS ECONOMICS ACHIEVE MAXIMUM EFFICIENCY LEVEL

STRAIGHT LINE (OPPORTUNITY COST CONSTANT)

CONVEX (OPPORTUNITY COST INCREASE)
TYPE OF
CURVES CONCAVE (OPPORTUNITY COST DECREASE)
A Production Possibilities Table
and Curve
% of resources % of resources
devoted to devoted to
production Number production Pounds
of guns of butter of butter of guns Row

0 0 100 15 A
20 4 80 14 B
40 7 60 12 C
60 9 40 9 D
80 11 20 5 E
100 12 0 0 F

.
 A Production Possibilities Table
and Curve
1 pound 15 A
of butter B
14
2 pounds C
of butter 12
D
Guns

5 E
5 pounds
of butter
F
0 4 7 9 11 12 Butter
4 guns 3 guns 1 gun
McGraw-Hill/Irwin 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.
Production Possibilities Curve (Frontier)

The WHOLE PPC represents

FULL PRODUCTION
Productive Efficiency
Full-Employment of Resources
PPC EXPLANATION
COMBINATION OF EFFICIENT PRODUCTION
A,B,C,D,E,F
RESOURCES/FOP USED EFFICENTLY

INEFFICIENT IN PRODUCTION
A LOT OF RESOURCES CAN BE USED
P RESOURCES WASTAGE

INEFFICIENT IN PRODUCTION
SCARCE IN RESOURCES
Q
Efficiency and Inefficiency
In production, wed like to have
productive efficiency 10
achieving as much output as
possible from a given amount of 8
inputs or resources.
Any point within the production
C Q

Guns
6
possibility curve represents
inefficiency.
D
4
Inefficiency getting less
P
output from inputs which, if 2
devoted to some other
activity, would produce 0
more output. 2 4 8 6 10
Butter
Efficiency and Inefficiency
Unattainable point,
10 given available technology,
resources and labor force
8
Efficient C Q
Guns

6
points
D
4
P
Inefficient
2 point
0
2 4 6 8 10
Butter
CHANGE IN PPC CURVE
Can we produce outside the production
possibility curve?
Can we have more?
CHANGE IN PPC CURVE

Society can produce more output if:

Technology is improved.
More resources are discovered.
Economic institutions get better at fulfilling our
wants.
CHANGE IN PPC CURVE
1. INCREASE IN PRODUCTION FACTORS
LABOR
CAPITAL
2. TECHNOLOGY INCREASE
Production Possibilities Curve
The PPC shows ALL possible combinations of two goods that can be produced if ALL available
resources are fully employed (used) with the best technology currently available

Guns A

A B

G
C

D
F

E E
Butter

OUR ECONOMY IS DRIVEN BY TECHNOLOGICAL

ADVANCEMENT
CONCLUSION
LIMITED RESOURCES IN FAMILY
INCOME
TIME
THIS LIMITED RESOURCES:
FAMILY CANNOT SATISFY ALL THE NEEDS & WANTS AT ONE
TIME.
So, All resources must fully utilized.
A PPC shows all combinations of goods & services that can
be produced given available resources & technology
A PPC is used to illustrate concept s such as scarcity and
opportunity cost.
Thank you
for your
attention