Tag: economic reconstruction

Output of Good-X decreases by 500 units and output of Good-Y increases by 500 units, when some resources are shifted from the production of X to the production of Y. The marginal opportunity cost is 1.0. The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. The formula to calculate marginal opportunity cost is sacrifice/gains. Therefore, the marginal opportunity cost is 500/500= 1.

In a free economy, the producers will produce goods for those who can afford to pay high price. Poorer sections of the society are often, thus, ignored. As a result, the gap between the rich and the poor enhances.

The slope of production possibility curve is the marginal opportunity cost, which refers to the additional sacrifice that an economy needs to make when it shifts resources and technology from production of one commodity to the other. Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost.  

The central economic problems rise for the basic fact that the resources in the economy is scarce whereas the wants are unlimited. Therefore, it deals with the efficient allocation of the resources for the production of goods and services in the economy and regulations/intervention of the government can do little about central economic problems.

In a free market economy, prices of commodities in the market are affected by the forces of demand and supply. This generates open competition in the market which leads to optimum allocation and utilization of resources in the economy without any planning or intervention of any authority.

The slope of production possibility curve shows the marginal opportunity cost which refers to the additional sacrifice that an economy must make when they shift resources and technology from production of one commodity to the other. Since resources are use specific, therefore, each time when one more unit of a commodity is produced a larger quantity of the other commodity is required to be sacrificed. This results in increasing marginal opportunity cost., which is denoted by the slope of the PPC.

The central economic problems rise for the basic fact that the resources in the economy is scarce with many alternative uses whereas the wants are unlimited. Therefore, it deals with the efficient allocation of the resources for the production of goods and services in the economy. 

Economics deals in the problems of how resources are allocated in the production of various goods and services in the economy for the satisfaction of human wants because these resources are scarce and have alternative uses whereas human wants are unlimited

Marginal opportunity cost $= \dfrac{\triangle \,\text{Loss of output of Good - 2}}{\triangle\, \text{Gain of output of Good - 1}} = \left[\dfrac{50}{10} = 5\right]$

Marginal opportunity cost $=5$.