Bus102 introduction to microeconomics notes and guidelines for group
Yes, Australia faces an increasing opportunity cost of ethanol. The production possibility frontier (PPF) illustrates the increasing opportunity cost of ethanol through its shape and movement outward over time. As more resources are devoted to the production of ethanol, there is a decrease in the other goods or services that could be produced with those same resources which results in a decrease in their availability. This causes the PPF to move outwards due to increased scarcity, illustrating an increase in opportunity cost. Additionally, as resources are devoted solely towards producing one good or service, such as ethanol, it shifts away from where it would otherwise produce maximum output and efficiency – resulting in a bowed-out PPF shape that further reflects increasing opportunity cost when compared to if all resources were allocated equally towards different viable outputs.