microbook_3e-page29 - o if resources are used efficiently x...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Production Function Quantity produced is a function of capital and labor: Q = f (K, L) x If you have one unit of kapital (for example, one stove in a kitchen) , x and you keep increasing number of workers (labor) at that machine the quantity produced will increase x but at a decreasing rate o because the workers start to get in each other’s way o “too many cooks in the kitchen” Q = f (K, L) This production function is drawn for a fixed amount of capital. x PPF represents: o all the possible combinations of goods (and services) o that can be produced,
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: o if resources are used efficiently. x Production possibilities are constrained by amount of labor and capital in the economy. x Cannot produce above PPF x If we shift labor from production of X and into production of Y, o less X will be produced o more Y will be produced x PPF summarizes opportunity cost of all such shifts. x If resources are not used efficiently o labor unemployment, o inefficient management x the economy is producing at a point below the PPF. Production Possibilities Frontier Page 29...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online