Confronting Scarcity: Choices In Production

Read this chapter to learn about the factors of production and the way they are combined in production. Use the production possibilities curve to represent the alternative combinations of goods and services that an economy can produce. Make sure to understand how the curve represents efficient, inefficient, and unattainable levels of production. Pay attention to how economic growth can be represented by shifts in the curve. Also in this chapter, learn about how economic systems compare.

3. Applications of the Production Possibilities Model


  • 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.