00:01
Okay, so we want to find out how to illustrate full employment with the production possibility frontier, which is what we would want to analyze here.
00:16
So we are given the production possibility frontier as taking this shape.
00:24
I'm not going to be absolutely accurate when it comes to the cost.
00:31
Curve, but i think what's important is to get the picture here.
00:38
Okay, so where we have a particular good, an economy producing two particular goods for analysis sake, good x and good y.
00:49
So the information is that the economy is at full employment.
00:55
The ppf illustrates which principle of economics.
00:59
So there's four that is a given there's four options and but before we look at the options we just need to emphasize that the ppf which is this actually illustrates the maximum capacity okay so basically full employment any production any combination of production of goods and services in this particular economy on the ppf represents full employment and within the ppf, such as at this point, means that is productive inefficiency.
01:39
Resources are not being utilized efficiently.
01:43
And any point outside of the ppf, obviously, is an impossible combination of the goods and services that can be produced in the economy.
01:53
Okay, so the other thing to note is that, obviously, when you're dealing with the maximum capacity of a particular economy if you were to increase production let's say from 20 to 40 million units of this particular good eggs it means obviously you're going to have to sacrifice so maybe if the original production at this particular was a hundred million of good eggs then you are likely to have less of well good y, i mean, good y being produced if you're going to increase production of good x.
02:36
So that's basically the concept here.
02:39
So if you have, for instance, this being point, original point a to point b, if you are going to increase production of good x, essentially moving from b, from a to b, it actually means that there's going to be some giving up of a sum of production for good y...