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Essay: 'Discuss how PPF theory, choice, scarcity and opportunity cost can be applied to the diagram below

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06/10/09 'Discuss how PPF theory, choice, scarcity and opportunity cost can be applied to the diagram below' The Production Possibility Frontier theory is the theory that a combination of goods and services can be produced whilst using all of the available factor resources efficiently. However, as we make more of one good or service, the amount of the other good or service will decrease as there is only a certain amount of available resources, some of which are in scarce supply and therefore this leads to opportunity cost and choice, also. All of these things can be applied to the diagram, which shows how the individual economy of the National Health Service can use its available resources to produce a combination of services; heart operations and all other operations because the PFF is the theory of how an economy produces a combination of goods and services and this is what the diagram is showing, scarcity can be applied because they need to make full efficient use of available resources, many of which are scarce. Finally, choice and opportunity cost can be also applied to the diagram as the economy can only produce so much - its maximum capacity and therefore choices have to be made, in this case ...read more.


Not only do the NHS have to make choices on what goods or services they will produce, but also businesses, both in the private and public sector of the economy also have to make choices. For example, a typical computer business may have to make a choice on whether to produce more keyboards than monitors because the resources they have only allows them to produce more of one or the other. An example of a choice that the government may have to make could be deciding on whether to build a school or a hospital because their resources; factors of production only allow them to do one or the other (we could use land in this example). Therefore, when we or businesses and governments choose something, most time, we miss out on other things, and this is called opportunity cost. Opportunity cost can be applied to the diagram; it is very closely linked to choice. We can say that is the consequence of choice, as choosing one thing leads to use missing out on another thing, in most cases anyway. Opportunity cost can simply be applied to the diagram because; if we look at points 'A' and 'B', we can see that if the NHS was using its resources ...read more.


The curve will also expand outwards if other factors were to be improves, such as higher quality or quantity of factors of production or reduction in costs. In conclusion, we can apply the PFF theory, choice, scarcity and opportunity cost to the diagram as they all have an influence on the diagram in one way shape or form. The PFF theory can be applied as that is what the diagram and curve is showing us, choice can easily be applied because the NHS are having to make choices, like everyone in life, weather it by people, businesses or governments and again that is what the diagram and curve are showing us; the effects of these choices. Related to choice is opportunity cost, which is another concept we can apply to this diagram. A direct consequence of choice and having to make choices, it can be applied as the diagram is showing us the opportunity cost of the NHS making its choices. Finally, scarcity can be applied as the diagram shows us what would be possible if the resources weren't scarce or an alternative was found, or if an increase in resources or factors of production occurred. ...read more.

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