Question

A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which of the following concepts cannot be illustrated by this model?

Answer 1

Answer: The answer is inflation

Step-by-step explanation:

Production possibility curve is the locus of points showing the various combination of two commodities that can be produced using the available resources and the available technology. The production possibility curve is a analytical tool which explained the problem of making a choice and opportunity cost., it is used to explain that the cost of producing a particular commodity is the amount of another commodity that must be sacrificed. The production possibility curve can be used to explain the following economic concept

Opportunity cost : This is cost of sacrificing one commodity for the other.This is the alternative forgone in order to produce that commodity.

Full employment : The point on the curve is used to indicate when the country is having full employment or when the country is having an efficient use of resources

Unemployment : The point inside the curve is used to indicate when the country is having unemployment or when such a country is having inefficient use of resources.

Economic growth : The outward shift of the curve indicate that the country is having economic growth, it is used to show when there is an increase in output per head in an economy.

Investment : The production possibility curve is also used to explain when there is increase in investment in the country, in the sense that, investment occurs when more capital goods and fewer consumer goods are produced.

However, The production possibility curve cannot be used to explain the concept of inflation in an economy of a country. In the sense that, in the period of inflation the taste and desires of consumers are not correctly influenced by the prices of goods and services, during inflation less of goods and services are purchased by consumers because inflation reduced their purchasing power.

Answer 2

A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. The following concepts can not be illustrated by this concept:

• the flow of dollars between sellers of jewelry and clothing and buyers of jewelry and clothing.

Step-by-step explanation:

• A Production Possibilities Frontier also known as the Production Possibility Curve or Transformation Curve. This curve illustrates a country or a business is utilizing its resources effectively by showing the point at which that country or business is producing its products efficiently.
• This curve is unable to tell you the flow of dollars between the seller and buyers of goods of a business or a country.
• It only tells us about the production of goods not the flow of cash.