Production Possibilities

Economies function by examining all of the possibilities that will allow the society to grow. A society’s resources and technologies play a huge deciding factor on what the society will choose to produce. The scarcity of resources and technologies impacts the economy and makes them unable to produce everything the society needs.

A Production Possibilities graph associates the efficiency of resources and new technologies that are available to a society.  This graph assists in comparing two different economies and their choices.  Each society has different values of the types of goods or services they would like to produce. If an economy decides to produce 5,000 tons of fuel the next best option would be to produce 10,000 tons of corn given their resources. The society can grow as an industrialized nation and or to satisfy the people's needs and wants. This is called an opportunity cost which the economy can compare which is more products are suiting for their society - the production of fuel or corn. By societies specializing in certain products this enables other societies to do the same and encourages trading. An economy's manufacturing costs increase the cost of the item will rise as well; this is called the law of increasing costs. Societies can focus on increasing production of an item which in turn diminishes production of other items they produce. This causes the items to increase in value due to the scarcity.

Scarcity is involved in everyone's life whether you are a student, working full-time or unemployed. I work full-time, getting married in 2012 and taking a microeconomic class. I face a scarcity of time. I leave my house at 6:30am and get home at 6:00 pm every night. I have to allocate my time according to what is important. By placing a value on a decision and comparing it to another valued decision I am able to use the next best choice. One significant opportunity cost that I have experienced by returning to school is deciding to take another course to excel in my job or focusing on my upcoming wedding. We are all faced with these decisions and by using the opportunity cost we are able to make a choice.