Confronting Scarcity: Choices In Production

3. Applications of the Production Possibilities Model

KEY TAKEAWAYS

  • The ideas of comparative advantage and specialization suggest that restrictions on international trade are likely to reduce production of goods and services.
  • Economic growth is the result of increasing the quantity or quality of an economy's factors of production and of advances in technology.
  • Policies to encourage growth generally involve postponing consumption to increase capital and human capital.
  • Market capitalist economies have generally proved more productive than mixed or command socialist economies.
  • Government plays a crucial role in any market economy.