Production Possibility Curve Essay

Words: 1236
Pages: 5

James Langley ECO 201
Module 1
Case Assignment

INTRODUCTION All economies have a production possibility curve and there any many different things that effect it. The removal of trade barriers or also known as free trade is not exempt from this list of things that affect an economies production possibility curve. Reduction in trade barriers can cause a country’s production possibility curve to shift outward. That is just one of many reasons that could cause an economy’s production possibility curve to shift outward. This production possibility curve can also determine an economy’s efficiency. In the Case in Point essay “The European Union and the Production Possibilites Curve,” comparative advantage

One example of an increase in the standard of living among the trading nations would be an increase of material goods and necessities. Material goods and necessities are now easily traded between nations and industries causing them to be cheaper and more easily obtained. This increase of material goods and necessities would raise the standard of living in that nation. Another example of an increase in the standard of living among the trading nations would be the reduction in the cost of goods. Due to the removal of trade barriers the cost of goods should go down. With the reduction in the cost of goods, the wealth and happiness of that trading nation should increase. A reduction in the cost of products and an increase in wealth and happiness among members of the trading nations raise the standards of living for those nations. Free trade among nations has advantages and disadvantages. It is argued that, overall, despite the disadvantages of free trade all parties come out ahead in the end. One example of an advantage of free trade is increased efficiency. By a nation increasing production due to free trade, that nation would then increase their efficiency. Nations would then be able to better allocate their resources and buy cheaper resources from other trading nations. Another example of an advantage of free trade is customer satisfaction. Free trade leads to an overall larger market and consumers then benefit from the competition and