oppertunity costs :: essays research papers

In todays society, economic decisions made involve the concept of scarcity. There atomic number 18 opportunity greets associated with any choice that you make. In order for an economy to produce more of sensation type of product, it will be forced to sacrifice units of turnout of another product. The shifting of resources from the production of genius good to another involves change magnitude sacrifices of the first good in order to generate an equal increase of the second good. This is known as the law of increasing opportunity courts. The economic rational for the law of increasing opportunity costs is that economic resources are not completely adaptable to alternative uses. The opportunity cost of producing a product tends to increase as more of it is produced because resources less suitable to its production must be employed.Prices are a measure of opportunity cost because they provide information about the value of one product in relation to another. The shape of the Pr oductions Possibility Frontier, (PPF), illustrates the principle of increasing opportunity costs (Graph 3). As more of one product is produced, increasingly larger amounts of the other product must be given up. In Graph 3, some factors of production are suited for producing both Product A and Product B, but as the production of one of the other brands increases, resources better suited to production of the other must be diverted. Producers of product A are not necessarily efficient producers of product B and just the opposite, so the opportunity cost increases as one moves toward either extreme on the curve of the production possibility frontier. If two products are very similar to one another, the production possibility frontier whitethorn be DOrlando 2shaped more like a straight line (Graph 2). As an example, lets say that two brands of drink are produced, Brand A and Brand B. These two brands of wine use the same grapes and the production process is the same. The only thing that is different is the name on the label. The same factors of production can produce either brand equally efficiently. If an increase in production of Brand B goes from 0 to 3 bottles, the production of Brand A must be decreased by 3 bottles. In this case, the two products are almost identical and can be produced equally efficiently using the same resources. The opportunity cost of producing one over the other remain constant between the two extremes