Good Production Possibility Frontier Essay Example
The above graph represents the production possibility frontier of Brazil. The x-axis in the graph represents the units of clothes that can be produced in Brazil in a year. The y-axis on the other hand shows the cans of soda that can be produced in the same year. The graph is projected based on the provide point where Brazil produces 100000 units of clothes in a year and at the same time produces 50,000 soda cans. For Brazil to produce more units of clothes, it has to give up the production of soda. This is why when Brazil produces 0units of soda, it is able to increase the output of clothes from 100000 units to 250000 units. If it decides to increase the production of soda, it has to give up the production of clothes. At the point where Brazil produces 0 units of clothes, it is able to produce 80,000 cans of soda which is an increase from 50000 cans.
If Brazil produces a combination of soda and clothes such that the point of production is inside the graph plotted (any point between the graph line and point 0,0), then it is said to be inefficient and misuses resources in the country. On the other hand, it is assume that Brazil cannot produce any point above the graph line because the resources are limited such that such a level of production is impossible. However, such a production can be achieved if the technology of production in Brazil advances such as fewer resources is used.
If Brazil produces 50,000 units of clothes and 25000 cans of soda, the it would be producing inside the graph and this means that it is not utilizing its resources well. The country is able to increase both the production of soda and clothes by using the resources that it has better.
The following graph represents the production possibility frontier of US based on the point provided where US can produce 65000 units of cloths and 250000 cans of soda.
Based on extrapolation, US can specialize in producing clothes only and produce 120,000 units in a year while on the other hand, it can specialize in soda and produce 500000 cans yearly.
US can produce and consume 32,500 units of clothing and 125,000 cans of soda. However, this point is below the graph line meaning that US will not be utilizing its potential fully. US can produce more of the two products without having to reduce the production of any. Though the US just needs these outputs for consumption, it can benefit if it traded the additional output of both goods.
Labor intensive goods usually use more labor than capital. Clothes require more labor and this is why they are said to be labor intensive. On the other hand, making of sodas is capital intensive because it depends more on the amount of capital that is available. Machines are used to mix the various components of soda and less human labor is used.
Since US is able to produce more of Sodas annually after specialization, it can be said to be capital abundant because it easily produces more sodas easily that require more capital. On the other hand, Brazil is labor abundant because of its ability to produce more of products that are labor intensive.
Trade can help reduce poverty in countries such as Brazil that are developing because they can specialize in items that require labor to produce and sell them to the developed countries. The income from such sales can be used to purchase goods that are capital intensive. With time, such developing countries can purchase capital from the developed countries such as US so that they can produce more of capital intensive goods. Specialization leads to more efficiency because more people are employed and acquire skills. Improved productivity of all individuals in a society leads to an increase in GDP of the country and this facilitates development. Trade also ensures that more people are employed in the production sector such that output is increased and the effects of this are that income of people in the society increases and they are never in poverty again.