Production Possibilities Frontier -- \'Guns

Production Possibilities Frontier -- 'Guns vs. Butter'

In a world of infinite resources and opportunities, there would be no need for economists. In other words, if a government could feed, clothe, and educate its people while maintaining a fully functional army there would be no need for sustained public policy debates. Another analogy might be found in the form of a farmer, living in a utopia without the concept of scarcity, who could plant as much corn and wheat as he or she desired. The farmer wouldn't need to budget very carefully, either. However, because resources are finite and scarce, people must make intelligent, careful choices with the help of economists and economic concepts.

Why can't the government fight a war and fight a war on poverty?' asks Joe or Jane Q. Public. There is not enough revenue or human and productive resources to do so within the nation's borders. For every gun that is bought, a bar (or more) of butter is sacrificed in the form of social programs, resources for education, or other non-military resources the government might like to deploy in the service of the populace. For every ear of wheat planted, the farmer sacrifices an ear of corn, and hopes that demand for wheat is higher this year, if a disproportionate amount of his fields and farmhands are used to plant, sow, tend to, and reap that crop.

Market equilibrium occurs when supply and demand are at their optimal level, when supply is equal to demand and ideally the price commanded earns a profit for the producer yet is not prohibitively high for the purchaser of the good. To reach this, there is always a period of negotiation. As price goes up, demand goes down, and as the price goes down, demand goes up. As the price goes down, suppliers are less willing to supply their goods, and as price goes up, suppliers are more eager to use more of their finite resources to supply that good or service. These are the laws of supply and demand, simply put. But when dealing with the supply and demand for many goods and services in the national economy, filled with substitute goods and many other external factors that impact these forces, or in government, this negotiation takes far longer to produce an optimal result. So the public must be understanding and patient as Washington D.C. tries to find out the optimal level of guns and butter to provide, given the scarcity of resources and funds to do so.