Good Advice is Rarer than Rubies

Good Advice is Rarer than Rubies

Haha i fooled you jeck! (:

The central problem of all economies is that wants are unlimited while resources are scarce. Since resources are limited in supply relative to our wants and have alternative uses, society have to decide what to produce, how to produce and for whom to produce. Whenever a choice is   made there is   an opportunity cost.   Opportunity cost is defined, as the highest-valued alternatives society has to sacrifice when a particular option is chosen.    

The concepts of scarcity, choice and opportunity cost can be illustrated by making use of   the production possibility curve.

The PPC is a curve, which shows the maximum attainable combinations of two goods that a society can produce with full utilization of all existing resources at a given level of technology.

The construction of the PPC is based on the following assumptions:
• The economy can only produce 2 goods, namely guns and rice.
• There is full employment of all resources in the economy
• Quantity and quality resources are assumed to be constant
• The method of production or state of technology is also assumed to be constant.

The table below illustrates the various combinations of the two goods that a society can produce. Combination   A to   F   are   extreme   possibilities in   that   for   A   the   economy   devotes all its resources to   rice and   produces 15m   tones   of   rice   and   no   guns   at   all,   and   for   F   all   resources   are   used   o   produce guns   and no   rice.   These are very unrealistic possibilities.   The society   will choose to   produce some   combination of   2   goods,   such   as   B   or   C