Tenth Pieces Of Diamonds example essay topic
We call it opportunity cost. For example, now we want to produce more diamonds, so we put more time on producing diamond instead of producing gold. Therefore, the point shifts from point B to point A on the graph. To produce 10 pieces of diamonds instead of 9 pieces of diamonds and 8 pieces of gold, sacrifices 8 pieces more gold at this point.
The opportunity cost was 8 more pieces of gold. There are a lot of reasons that can shift the PPF outward. For instance, technologically advantage can lead to produce more of each goods. That's called a growth; it may result from additional resources in the society.
A point outside the frontier such as point E is scarcity. A scarcity is the amount of goods the society is not attainable to produce. At point E, the society is unable to produce 9 units of diamonds and 16 units of gold at the same time with the limited resources and technology currently available. On the other hand, point F which is on the graph and within the frontier is inefficiency.
A productive inefficiency is a amount of goods that the society is attainable to produce without at least one good will be scarify. In another word, the society can produce more than what it is right now. For example, an empty rental apartment is a productive inefficiency. The "bowing out" of the frontier shows the law of increasing opportunity cost. The rise in the marginal opportunity cost of producing a good as more of that good is produced. For example, it will take more time to get the tenth pieces of diamonds compare to the seventh pieces of diamonds.
When the resources are found, it gets harder and harder to find the next one. The PPF shows what the society is attainable to produce and what not an option is. It helps us to identify the principle of opportunity cost and the economic growth.