Production possibilities table

After you have worked through this section of the learning unit, you should be able to:

• interpret the data in a production possibilities table

We will construct a production possibilities table for a hypothetical country called Zanadu. The two products that are produced by this country, using their resources fully and efficiently, are laptops and mobile phones.

The different combinations of laptops and mobile phones, using resources fully and efficiently, that can be produced are indicated in the following production possibilities table:

In this section we will construct a production possibilities table for a hypothetical country called Zanadu. The two products that are produced by this country, using their resources fully and efficiently, are laptops and mobile phones.

The different combinations of laptops and mobile phones, using resources fully and efficiently, that can be produced are indicated in the following production possibilities table:

Table 1 Production possibilities for Zanadu

Combination Laptops Mobile Phones
A 5 000         0
B 4 000 10 000
C 3 000 18 000
D 2 000 24 000
E 1 000 28 000
F       0 30 000

Let's turn our attention to the table to see exactly what the data is telling us.

Study the above table and answer the following questions:

How many laptops will be produced it the country uses all its resources for the production of laptops?

It is 5 000 as indicated by combination A.

Think again.

Note that if 10 000 mobile phones are produced, Zanadu can only produce 4 000 laptops and not 5 000 laptops.

Combination C indicates that it is possible for Zanadu to produce 3 000 laptops and 18 000 mobile phones, while combination D indicates a production possibility of 2 000 laptops and 24 000 mobile phones. Combination E indicates a production possibility of 1 000 laptops and 28 000 mobile phones.

How many mobile phones will be produced if the country uses all its resources for the production of laptops?

It is zero. If the country uses all its resources to produce laptops, then no resources will be available to produce mobile phones, and the production of mobile phones must indeed be zero. This is indicated by combination A.

Think again.

In terms of combination F in the above table, how many mobile phones could be produced if all the resources were to be used for the production of mobile phones, and how many laptops?

Laptops

Mobile Phones

Combination F tells us that if all the resources are used for the production of mobile phones, then 30 000 mobile phones will be produced and zero laptops.

Think again.

In terms of combination B in the above table, how many laptops could be produced and how many mobile phones?

Laptops

Mobile Phones

If you look at a combination such as B, it tells you that if Zanadu allocates some of its resources to the production of laptops and some to the production of mobile phones and makes efficient use of these resources, then it will be able to produce 4 000 laptops and 10 000 mobile phones.

Think again.

Note that if 10 000 mobile phones are produced, Zanadu can only produce 4 000 laptops and not 5 000 laptops.

Combination C indicates that it is possible for Zanadu to produce 3 000 laptops and 18 000 mobile phones, while combination D indicates a production possibility of 2 000 laptops and 24 000 mobile phones. Combination E indicates a production possibility of 1 000 laptops and 28 000 mobile phones.

Watch the following video clip for a summary of the possibilities table.

Activity

Do the following activity to make sure you understand the production possibilities table because we will use data in a production possibilities table to draw the production possibilities curve or frontier:

• If Paradiso uses all its resources efficiently for the production of food, it will be able to produce 1 000 tons of food.
• If Paradiso uses all its resources efficiently, it will be able to produce 900 tons of food and one million guns.
• If Paradiso uses all its resources efficiently, it will be able to produce 750 tons of food and two million guns.
• If Paradiso uses all its resources efficiently, it will be able to produce 550 tons of food and three million guns.
• If Paradiso uses all its resources efficiently, it will be able to produce 300 tons of food and four million guns.
• If Paradiso uses all its resources efficiently for the production of guns, it will be able to produce five million guns.
 Combination Food (tons) Guns (millions) A 0 B C D E F 0
 Combination Food (tons) Guns (millions) A 1 000 0 B 900 1 C 750 2 D 550 3 E 300 4 F 0 5