So, if all the activities we mentioned contribute to the final product or service, that means that virtually every department is involved â not just manufacturing or operations, but also human resources, accounting, marketing, and so on. This is the essence of Total Quality Management (TQM).
In economics, the law of increasing costs is a principle that states that once all factors of production (land, labor, capital) are at maximum output and efficiency, producing more will cost more than average. As production increases, the opportunity cost does as well. The best way to look at this is to review an example of an economy that only produces two things - cars and oranges. If all the resources of the economy are put into producing only oranges, there will not be any factors of production available to produce cars.
Economic growth is the sustained expansion of production possibilities. If more capital is accumulated production possibilities increase and the PPF shifts outward. The (opportunity) cost of economic growth is that resources used to increase capital cannot be used to produce current consumption goods and services. 2013 Pearson Education, Inc. Publishing as Addison Wesley TheEconomic Problem Chapter CHAPTER CHECKLIST Chapter 3 develops an economic model, the production possibilities frontier, or PPF, model.