How Do You Achieve Production Efficiency?

In this article, we're going to talk about production efficiency in economics. So production efficiency refers to a situation in which the economy is producing so many goods. Let's say that it's producing food and steel it's producing so much with the resources it has that it cannot produce an additional unit of one of the goods.

let's say food without decreasing production of the other good which is steel. For example, let's say here's our PPF curve so it's our production possibilities frontier and we could conceivably produce a hundred million tonnes of food if we produce zero tons of steel, or we could produce 50 million tonnes of steel and no food.


All the combinations along this curve are efficient in production so let's take one for example. Let's say that if we did 90 million tons of food and we would be able to produce 40 million tons of steel. Ok, let's just make this point here.


Ok so that point is efficient in production and I want to prove it to you. I want to prove it to you by using this definition here. So at this point, we're getting 90 million tons of food and 40 million tons of steel we can also call it as (90, 40) point. Now if we were to say well let's produce an additional ton of food, let's see if we could do 91 million, we could but we would have to decrease the production of steel. We cannot produce additional food because of 91 million tons of food with 40 that would be a point here


and that point is not feasible. All the points outside of the curve, these are not currently feasible given the resources that we currently have. We only have so many resources so many people so much capital and so forth to produce so much food. This (90, 40) point, this point as well as all the other points all along that curve are efficient in production because if you take any point along this curve it's basically saying look at those points on that curve you could not produce any more food without giving up some steel. 

Alternatively, you can't produce any more steel without giving up some food and so that's what efficiency in production means. Now all the points on the interior of this curve are inefficient. So in what I mean by inefficient is, let's take this point right here-


Okay, let's say that corresponds to 70 million foods and then 40 million steel. Now that is inefficient because look we could increase from 70 million to 90 million we could increase and get 20 million additional tons of food we could go up (90, 40) without giving up any steel. We wouldn't have to give up any steel to do it because if we go from (70, 40) to (90, 40) the steel production does not decrease to get us from 70 to 90 but once we are on the PPF curve that is no longer possible because we're maxed out. Think of efficiency in production as we are maxed out we cannot produce any more of one good without decreasing our production of the other.

Post a Comment

0 Comments