Production Possibilities

Production PossibilitiesProduction possibilities frontier (PPF) or more commonly known as transformation wind is a graph that demonst posts the difference between ii goods that an economy with scarce resources could take a crap. There are two primary determinants that whitethorn greatly affect the orientation of the PPF of a republic. These are product functions and factor out endowments. There is relatively a very big possibility for the PPF of a res publica to shift inward. Instances such as the occurrence of war and technical disturbances that may cause technological growth and development to cease are two of the possible causes of a PPF inward shift. The Principle of Diminishing peripheral Returns tidy sum also affect the shift of the PPF of a nation. Other factors such as currency devaluation or technological and political innovation basis also shift a nations PPF inward.Figure 1 shows the inward shift of the PPF reduce of a nation that has undergone war. Due to th e war, the resources of the nation, which are primarily used to produce the food and medicine have been devastated. This devastation of the resources leads to decrease in the rate of technological innovations. Moreover, the war also gave rise to the currency devaluation of the nation. By these, it can be concluded that these instances can increase the possibility of the nations PPF to shift inward.Given a fixed proportion of resources added with another unit of resource needed by a nation for the production of two goods and the machines needed by the nation in the production, the crook of the production possibility frontier of a nation would shift inward tothe left in time this is due to the justness of diminishing marginal returns. The law states that even though other units of resources are added to the nations tool for production, the marginal output of the nation would decrement until it reaches negative. And when it reaches the negative value, the PPF curve of that nation wo uld shift inward. Currency devaluation also affects the inward shift of a nations PPF curve when some of the nations resources are being purchased from other nations. The decrease in the value of the nations currency would affect the amount and the value of the resources purchased. Decline in the rate of innovations could also aid in the inward shift of the PPF curve of the nation since technological innovations may help develop and improve the production process.ReferencesDevadoss, S., Song, W. (2003). Factor Market Oligopsony and the Production Possibility Frontier Review of multinational Economics, 11, 729- 744.RetrievedNovember 5, 2007 from SSRN database.Goodwin, N. R. (2007, October 9). Production possibility frontier. Retrieved November 5, 2007 from http//www.eoearth.org/article/Production_possibility_frontier.Parasuraman, N. S. (2002, May 1). Production-Possibility Frontier (PPF) Retrieved November 5, 2007, from http//www.geocities.com/parasu41/PPF/.Suranovic, S. M. (2007 ). International calling Theory and Policy Electronic Version. Retrieved November 5, 2007, from http//internationalecon.com/Trade/Tch60/T60- 7.php.