ECONS 101

RELATIONSHIP BTW PRODUCTION POSSIBILITY CURVE & OPPORTUNITY COST

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We are continuing from where we stopped last time.

Interpretation/ Points to Note from the Graph:

  Points A to F on the graph indicate efficient use of resources.

  At Points O  & P (Outside the curve), production is not feasible. Production at these points are not feasible due to the limited resources and technology.

  At points K & L (Inside the curve), production is feasible. It represents where resources are not efficiently utilised.

 The downward slope of the PPC indicates that there is an opportunity cost of producing more of one type of commodity and less of the other due to limited resources and technical know-how.

RELATIONSHIP BTW PRODUCTION POSSIBILITY CURVE & OPPORTUNITY COST

Opportunity cost by definition is an expression of cost in terms of forgone alternatives. It is the satisfaction of one's want at the expense of another want. It refers to the wants that are left unsatisfied in order to satisfy another more pressing need. The Production Possibility Curve (PPC) is directly connected with opportunity. The PPC involves sacrifice in the production of one commodity in order that another one can be produced. Once more resources are allocated to the production of a commodity, less resources would be allocated to the production of others (because resources are scarce). The Opportunity cost of producing one type of commodity is measured in terms of the quantity of other commodities forgone. The downward slope of the PPC Illustrates that there is an opportunity cost involved in the production of more of a commodity. This cost is measured in terms of quantity of another commodity forgone or sacrificed.

CONCEPTS OF TOTAL, AVERAGE & MARGINAL PRODUCTIVITY

1. Total Product (TP)- is defined as the total quantity of commodities produced at a particular time as a result of the combination of all the factors of production.

Total Product is expressed mathematically as :  TP= AP X Labour

EXAMPLE 1: If 30 men were employed in a farm and they produce an average of 15 tonnes of cassava per person, calculate the total product.

Solution:  TP= AP X Labour

                   TP= 15 tonnes X 30

                       =450 tonnes.

2. Average Product (AP)- is defined as the output per unit of the variable factor (Labour or Capital) employed. This is obtained by dividing the total output by the number of labour or capital employed.

AP can be expressed mathematically as:

AP=  Total Product (Output)/No. of Labour (or Capital) employed

EXAMPLE 2: If 3, 000 tonnes of cassava were harvested by 60 men in a farm on daily basis, calculate the average output.

Solution:

AP = Total Output/No. of Labour (men)

     = 3, 000 tonnes/60 men

    = 50 tonnes/person.

3.  Marginal Product (MP)-  is defined as the addition to total output brought about as a result of the employment of an additional unit of a variable factor. MP can be expressed mathematically as:

 MP=  Changes in TP /Changes in variable factor

EXAMPLE 3: If 3, 080 tonnes of cassava were harvested from the same farm as a result of an additional man to the 60 men, calculate the marginal product.

Solution:

MP  = (3, 080 - 3, 000)/ (61 - 60)

        = 80/1

MP  = 80 tonnes.

TABLE: TOTAL PRODUCT, AVERAGE PRODUCT & MARGINAL PRODUCT.

NO. OF WORKERS	TOTAL PRODUCT (KG)	AVERAGE PRODUCT (KG)	MARGINAL PRODUCT (KG)
1 2 3 4 5 6 7	4 12 24 40 45 48 42	4 6 8 10 9 8 6	- 8 12 16 5 3 -6

NOTE: PARTS OF THIS POST WERE CULLED FROM TONAD ESSENTIAL ECONOMICS FOR SENIOR SECONDARY SCHOOLS BY C.E ANDE.  WE AT EDU-MADE-EASY RESPECT THIS CRAFT TOO MUCH TO DENY ITS ORIGIN. THANK YOU

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