Factors of production and PPC

Factors of Production
- Resources required to produce goods and services
           1) Land - Natural Resources
           2) Labor - Workforce
           3) Capitol
                    2 types
                       - Physical Capitol- Tools, Machinery, Robots, Factory
                       - Human Capitol- Skills, Talent, Knowledge
           4) Entrepreneurship- Be innovative
                                             Be a risk taker
                         
Trade- offs
        - Alternatives that we give up whenever we choose one course of action over another

Opportunity Cost
        - Form of a trade- off
            (Next best alternative)
What is opportunity cost

Productions Possibility Curve (PPC) (PPG) (PPF)
Understanding PPC

• Alternative ways in how to use a country's resources
• 4 assumptions of a PPG

1. Two Goods

• Resources are used to produce after one or both of only 2 goods

               2.   Fixed Resources

• Quantities of land, labor, capitol, and entrepreneurship resources do not change

              3.   Fixed Technology

• Information and knowledge that society has about production of goods and services is fixed

               4.   Technical Efficiency

                          A is attainable but not efficient

                          B, D, C are efficient and attainable

                          X is unattainable

 

Efficiency - Using resources in such a way to maximize the production of goods and services

Allocative Efficiency-  The products being produced in the least costly way and this is any point on the production possibility curve

Under Utilization - Using fewer resources than the economy is capable of using

3 Types of Movement that occur within PPC

1. Inside the PPC

• Occurs when resources are employed or underemployed (No productive efficiency)

     2.   Along the PPC

     3.   Out of the PPC

What causes PPC/ PPF to shift

1. Technology Change
2. Change in Resources
3. Economic Growth
4. Change in labor force
5. Natural disasters / war / famine
6. More education ( Human Capitol)

Inside Curve - Underutilization (Attainable/ Inefficient)

On Curve - Attainable + Efficient

Outside Curve - Unattainable with Current Resources