Question

this is for microeconomics: explain how a model has helped you solve a problem. Define the model and explain the problem it helped solve

Answer 1

In this question I will talk about the PPC model. PPC (production possibility curve) or PPF is the abbreviation for the production possibility frontier.

The PPF is a graph which represents the combination of two commodities which the economy can produce with the given limited amount of resources. If the economy decides to produce more of a given commodity then it must reduce the production of the other commodity because the resources are limited and both the commodities need to be produced with those amount of resources only.

Type of problems it helps to solve-   If the question says to find out the combination of commodities which the economy cannot produce with the given amount of limited resources then we can graphically find out .The points outside the PPC curve are unatainable by the economy because the economy does not have the resources to produce that combination of goods.

Whereas the points lying on the curve are atainable by the economy and the points inside PPC represents the inefficiency of the resources employed in the economy.

It also helps to find the opportunity cost by using the formula of sacrifice / gain.

In the everyday life we can find out what is the best combination of commodities that we can use because we as individuals also have limited resources. We can find out that what amount of one commodity we have to sacrifice to gain the quantity of the other commodity and the resources should also be efficiently allocated.