What Is Full Employment & Full Production?
In economics, the concepts of full employment and full production are analyzed using the model of the production possibilities curve. The curve shows the relationship between two outputs as a result of the maximum usage of inputs, which includes employment. However, full employment, full production and the production possibilities curve are purely hypothetical concepts that are difficult to measure and define in the real world.
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The Production Possibilities Curve
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The production possibilities curve is a concept in macroeconomics that illustrates the relationships between two outputs in a hypothetical economy. Of course, most economies produce more than two outputs, but by considering only two, the relationship between resources and technology becomes easier to understand. The model is therefore more theoretical than applied. With one output on the x-axis and the other on the y-axis, the quantities of both outputs are mapped. A curve, convex to the origin, is produced, i.e. you can have all of one output, and none of the other, a little of one but much of the other, or equal quantities of both.
Full Production
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Any point on the production possibilities curve represents an economy at the full level of production. That is, at the current level of of technology and resources, no output of one product can be increased without reducing the output for the other product. Any point outside the production possibilities curve (that is, on the opposite side of the graph's origin) is technically unattainable. Any point that lies on the inside of the production possibilities curve signifies a point where the economy is not using its resources to their full potential.
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Full Employment
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If an economy is operating on the production possibilities curve, and is thus operating at full production, all resources are used to their fullest extent. In macroeconomics, there are two groups of resources: capital and labor. Capital is anything except labor, that is, machinery, agricultural land, buildings and vehicles among other things. If both capital and labor are operating at their furthest extent, full employment must equate to full production. However, the concept of full employment is not relevant in the real world. There is a natural level of unemployment in most economies, which may include those who are between jobs, are taking time off to travel, do not wish to work, etc.
Applications
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The concepts of full production and full employment on the production possibilities curve are purely theoretical and thus difficult to apply to the real world. However, many economists use the natural level of unemployment as a measure of full employment. It is hard to know if this level of employment does actually mean full production because it is difficult to measure the full use of capital. Furthermore, increases in output, or GDP, may not only be a result of an increase in production but also an increase in technology or labor productivity.
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and that's What am up too.
