Q.

Why does economic growth take place in the analysis of Production possibilities
frontier (PPF)?

Ans:- In economics scarcity requires that choices be made concerning what will be
produced, how it will be produced, and for whom. Here choice means that some
alternatives must be forgone. Every alternative has some opportunity cost. We can
perceive the concepts of choice and opportunity cost from the analysis of Production
possibilities frontier (PPF).

In figure 1 shows a production possibilities frontier. Let’s assume that two economic
goods (or classes of economic goods) are to be produced. One is capital goods and the
other is consumer goods. Here horizontal axis recognizes the consumer goods and the
vertical shows the capital goods. Table gives the amounts of capital goods and
consumer goods that this economy can produce with its limited factors of production
and technical knowledge. These amounts are graphed in Figure 1. The table and the
graph contain the same information

Table 1

Capital goods Consumer goods

0 20
4 16
8 10
10 0
0 25
4 21
8 16
12 0

Production Possibilities Frontier

30
25 U PPF
Consumer goods

A
20
B
15
10 I C

5
D
0
0 5 10 15
capital goods

Figure 1
The PPF shows the combinations of outputs of two goods that can be produced from
society’s resources are utilized to their maximum potential. Point u is society’s PPF.
With its available resources, the economy cannot produce 23 units of consumer goods
and 3 units of capital goods. Points like I inside the PPF and, therefore, attainable
represent an efficient use of the society’s resources. Each intermediate point on the
PPF between a and d represents a different combination of consumer goods and
capital goods that could be produced using the same resources and technology.

So the production possibilities frontier (PPF) shows the combinations of goods that
can be produced when the factors of production are utilized to their full potential. The
production possibilities curve reveals the economic choices open to society.

We can interpret the economic growth with the help of PPF. That means how a
country drives itself from inefficiency to efficiency.

In table 2 a schedule of PPF of a country is shown. This table 2 contains a list of six
possible point- a,b,c,d,e.f. Assume that, using its all resources fully for efficiently its
possible to produce various combinations of capital goods and consumer goods. Table
shows that if the country wants to produce only consumer goods it can produce 15
units of consumer products. And it can produce 5 units of capital goods only without
producing any consumer goods
Table 2
Capital goods Consumer goods
0 15
1 14
2 12
3 9
4 5
5 0
0 20
1 19
2 17
3 14
4 10
6 0
Now see, what happens if economic growth takes place. Resources have been
increased in economy. So it can possible to use more resources P P Fto& produces
E c o no m icmore
G ro wth
consumer goods and capital goods. It results in2 a5 situation where the production
possibilities line goes up towards the shaded line or shifting to the right.
20
Consumer goods

There is an another explanation that can describe 1the5 reasons why economic growth
takes place. The economy on the PPF most choose 1 0 among those combinations of
consumer goods and capital goods located on PPF . What are the implications for the
5
future of selecting consumer goods or capital goods? If consumer goods are chosen,
more consumer wants are satisfied today, but additions0 to the stock of capital are
smaller. If capital goods are selected fewer wants are 0satisfied today,
2 but additions
4 to 6 8
the stock of capital are greater. The creation of large stock of capital today means
c a p ita l g o o d s
more production in the future. The society that selects capital goods will therefore

Figure 2
experience greater outwards shift of the PPF in the future and will be able to satisfy
more wants in the future.

So economic growth occurs when the production possibilities frontier expands

outward and to the right. One source of economic growth is the expansion of
capital.

Q. How economic growth can be accelerated in Bangladesh?

Ans:- Bangladesh, geographically and economically very poor country. Economic

growth of this country is not mentionable or praiseworthy. Long long ways to go to
reach the platform. If we consider the elements that can accelerate economic growth
in Bangladesh, we have to start with some major elements. Here they are:

1. Natural Resources- Bangladesh has plenty of natural resources but there is no

such efficient utilization of that.
2. Skilled manpower- to accelerate the economic growth best utilization of natural
resources is needed. Here only skilled manpower can do it.
3. Capital- saving is one of the sources of capital. Supply capital ensures the labor
and the best uses of other resources which accelerate the production capacity.
4. Better communication and transportation systems- transport and
communication are the vain and arteries of country.
5. Advanced technology- best possible uses of resources depends on advancement
of technology.
6. Training- best training system provides the best way to use the technology.
7. Education- it is the highest priority to a man to contribute in country’s
development process.
8. Control of birth rate- greater population causes greater demands that will result
in less saving, greater deficiency states revenue etc.
9. Political stability- to implement development planning process and to keep
production going on and on, we need political stability.

Above described elements are remarkably associated with the acceleration of

economic growth in our country. These have been found as the major requirements in
developing our country’s economic conditions