Civil Engineering Reference
In-Depth Information
Figure 1.1
The trade-off between military goods and civilian goods
Points A to F represent the various combinations of military and civilian goods
that can be achieved. Connecting the points with a smooth line creates the production
possibility curve. Point G lies outside the production possibility curve and is unattainable
at the present time; point H represents an inefficient use of resources at the present
time.
A
B
G
C
D
H
E
F
Units of civilian goods per year
There are a number of assumptions underlying the production possibility curve.
The first relates to the fact that we are referring to the output possible on a yearly
basis. In other words, we have specified a time period during which production
takes place. Second, we are assuming that resources are fixed throughout this time
period. To understand fully what is meant by a fixed amount of resources, consider
the two lists that follow, showing (a) factors that influence labour hours available
for work and (b) factors that influence productivity, or the output per unit of input.
FACTORS INFLUENCING LABOUR HOURS AVAILABLE FOR WORK
The number of labour hours available for work depends on the nature of human
resources in society. This is determined by three factors:
•
the number of economically active people that make up the labour force - this
depends on the size of the population and its age structure, as children and
retired persons will be economically inactive
•
the percentage of the labour force who then choose to work
•
prevailing customs and traditions (such as typical length of the working week,
number of bank holidays, etc.).
