Consider the following production possibilities frontier model for an economy that produces only two goods: barley and tablets. Which of the following is true regarding this economic model? The fact that there are only two goods produced in this theoretical economy, when, in reality, economies produce many more types of goods, means this model is generally useless. This PPF is not an economic model. In order to construct such a model, an economist would need real life data regarding countries that only produce two goods. The fact that there are only two goods produced in this theoretical economy is a simplifying assumption that still allows economists to demonstrate key economic concepts.

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Business

Ronald Pratt

21 May, 01:21

Consider the following production possibilities frontier model for an economy that produces only two goods: barley and tablets. Which of the following is true regarding this economic model? The fact that there are only two goods produced in this theoretical economy, when, in reality, economies produce many more types of goods, means this model is generally useless. This PPF is not an economic model. In order to construct such a model, an economist would need real life data regarding countries that only produce two goods. The fact that there are only two goods produced in this theoretical economy is a simplifying assumption that still allows economists to demonstrate key economic concepts.

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Devyn Greer · Answer 1

The fact that there are only two goods produced in this theoretical economy is a simplifying assumption that still allows economists to demonstrate key economic concepts.

Explanation:

The purpose of economic models is not exactly to portray complex reality, but to produce insights into how it works. Creating a model with two countries that produce thousands of products would be methodologically unfeasible. Economists therefore adopt simplifications to explain concepts and create insights into how the real economy works.