PPCs+-+Showing+Underemployment+and+Unemployment

=**PPCs- Showing Underemployment and Unemployment**=

The production-possibility curve in economics is a graph that displays the different rates of production of two goods/services that an economy could produce with limited productive resources. The ppc graph shows underemployment and unemployment as any point inside of the curve (frontier), and although this rate of production is attainable, it is inefficient and therefore unpreferable. Unemployment and the failure to achieve productive efficiency cause an economy to operate at a point inside its production possibilities curve.

The economy could choose to operate at less than capacity somewhere inside the curve, but such a combination of goods would be less than what the economy is capable of doing. At any point inside the curve, the economy could produce more of one or both of the products that it is producing at that point. Economies and businesses are constantly trying to be productively efficient and produce at a point on the ppc frontier. In the graph below, point X is oppostie point Y in a couple of ways; point Y is preferrable but unattainable and point X is attainable but not preferable.

Underemployment, productive efficiency, and the ppc
At point X the economy is falling short of the various maximum combinations of computers and bicycles represented by points //on// the production possibilities curve. Any point inside the production possibilities curve, (i.e. point x), represents unemployment or a failure to achieve productive efficiency. The economy could produce more of one or both products that it is producing at point x.

Example of how underemployment can cause productive inefficiency
media type="youtube" key="4wp3m1vg06Q&hl=en&fs=1" height="344" width="425" For the chocolate factory to succeed to its highest potential (and reach the frontier of the ppc), every part of the factory must be producing at maximum speed and efficiency. Lucy and her friend, besides being inefficient workers, are quick to see how underemployment can decrease production speed and the overall productive effieciency of the factory. With underemployment in the wrapping department, there is not enough labor to wrap all the candies fast enough for the department to reach it's needed potential. It is attainable for the department to wrap candy at this slower rate, but it would be more efficient to hire more labor to increase product output. With Lucy and Ethel working at the chocolate factory the factory would be producing inside of the production possibilities curve.

Test Yourself:
Which point is a point of unemployment/underemployment on this PPC? Is it attainable

Links:
To see more about unemployment on the PPC curve, visit http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=unemployment,+production+possibilities

For an online slide show about the PPC, got to http://www.cals.ncsu.edu/course/are012/lecture/lectur12/sld015.htm

For more information about the Production Possibilities Frontier, visit http://www.netmba.com/econ/micro/production/possibility/

Answer:
Point C is a point of unemployment/underemployment. This point of production is attainable, but it is not preferable because the economy of the graph is not producing products at it's maximum potential, the economy could be producing more of one or both products, but it isn't.