Production

1
Production Possibilities Curve or Frontier
2
You have your own country. You need to decide
do we produce ?
oranges ... or
Cheetos?
pijamas ... or
toasters
just imagine...
3
http//www.bradyworld.com/cover/minnow.jpg
The ship set ground on the shore of this
uncharted desert isle
3 of 31
4
http//images.google.com/imgres?imgurlwww.timvp.c
om/gillign2.jpgimgrefurl http//www.timvp.com/gi
lligan.htmlh270w295prev/images3Fq3Dgilliga
n2527s2Bisland 26svnum3D1026hl3Den26lr3D2
6ie3DUTF-826oe3DUTF-8
5
What was the name of the boat?
6
There are 4 types of resources that we can use to
make goods services __________, __________,
___________, __________________.
land
labor
capital
entrepreneurship
What resources do you think are already there
that we can use to make some goods services?
7
So these inhabitants of this island nation could
decide to spend their resources.
7 of 31
8
http//www.coracle-fishing.net/corac-pix2/net-11x.
jpg
Or maybe they spend their valuable resources
doing this
8 of 31
http//www.tasaday.com/images/_sl-003.jpg
http//www.surfingforlife.com/g/cult_b10.jpg
9
which could get them this
Our resources are ___________ our wants are
____________. How shall we spend our valuable
resources?
limited
unlimited
10
...wants us to spend our resources making ...
...wants us to spend our resources making ...
A production possibilities curve shows the
alternative ways we can use our valuable
resources.
11
If we used all of our resources on the island to
make lotion made no nets, we could make _____
lotions.
100
100
If we used all our resources to make nets, we
could make ____ nets.
90
16
75
If we made 12 nets, we would have enough
resources left over to make ____ lotions.
50
50
0
4
8
12
16
12
A production possibilities curve shows the
alternative ways we can use our valuable
_____________.
100
resources
90
75
50
12 of 31
0
4
8
12
16
13
As we move along the PP curve we see the
___________ a country must make in the production
of 2 commodities.
trade-offs
100
90
Why? If we use our resources to make 1 thing, we
cant make the other.
75
50
0
4
8
12
16
13 of 31
14
Maybe this economy will decide to produce here ...
... or here
... or here
At any point along the curve, an economy is using
its resources efficiently. Efficiency means it
is using resources in such a way as to maximize
the production of ______ __________.
100
90
75
50
goods
services
0
4
8
12
16
15
If an economy is producing at a point inside the
PPC, that indicates an underutilization of
resources.
100
90
75
50
0
4
8
12
16
16
production
This curve is called the ____________
_____________ curve. What would happen to
possible production if this economy got many more
workers?
possibilities
What if there was a new invention that greatly
increased productivity?
100
90
75
The PPC illustrates growth an increase in the
production capacity of a country.
50
16 of 31
0
4
8
12
16
17
continue Chapter 1 notes
PPC -- production possibilities curve graph
that shows alternative ways to use a countrys
resources.
PPF -- production possibilities frontier line
on the PPC graph that shows the maximum possible
output.
Each point along curve reflects a
trade-off...more shoes means fewer tractors.
Each point along curve reflects a
trade-off...more shoes means fewer tractors.
A
A
shoes
shoes
B
B
C
C
D
D
tractors
tractors
18
Efficiency using resources to maximize
production any point along curve.
A
shoes
B
C
E
D
tractors
Underutilization point inside the curve not
using all resources capable of using
19
What would happen to possible production if this
economy was at war and factories were being
bombed? Where is that happening today?
Lotions
What if people were leaving the country to work
in another country? Think European Union
100
90
75
A leftward shift of the PPC is bad.
50
19 of 33
Nets
0
4
8
12
16
20
Factors that will shift a PPC out...
increase in productive labor force
1.
Lotions
new technology
2.
100
Increase quant. qual. of natural resources
90
3.
75
4.
Increase quant. qual. of capital goods
50
5.
Increase health education
Nets
0
4
8
12
16
21
This economy could produce at Point A or B. At
which point is this economy producing more
efficiently?
Lotions
Both are equally efficient!
100
At which point should this economy produce if it
wants to grow more quickly and shift out its PPC?

90
A.
75
50
B.
Nets
0
4
8
12
16
22
It should produce at B. Why? Because nets are a
___________ good. They are used to produce other
goods.
capital
Lotions
100
90
A.
75
50
B.
22 of 33
Nets
0
4
8
12
16
23
As we move along the PP curve we see the
___________ a country must make in the production
of 2 commodities.
trade-offs
Lotions
100
Why? If we use our resources to make 1 thing, we
cant make the other.
90
75
50
Most PP curves are drawn as bowed out or
___________ to the origin.
convex
Nets
0
4
8
12
16
24
While most PP curves are ___________ to origin
indicating an _____________ opportunity cost.
Yogurt
convex
increasing
16
it is possible to have a PP curve that is a
_______ line indicating ____________ opportunity
costs.
12
straight
constant
8
4
0
4
8
12
16
Butter
25
Blue Jeans
A PP curve like this one that is ___________ to
origin indicates a _____________ opportunity
cost.
16
concave
decreasing
12
8
4
0
4
8
12
16
Radishes
26
The PP curve is bowed out b/c some ____________
are better suited for the production of one good
over the other.
resources
Lotions
100
90
As we move more more production into one item,
the ___________________ of making that item
increases.
75
opportunity cost
50
0
4
8
12
16
Nets for Fishing
27
This illustrates.
The Law of
Increasing Cost
In order to get more of something, you have to
give up ever-increasing quantities of something
else.
28
Whats the opportunity cost of making the first 4
nets?
Lotions
100
Whats the cost of making the second 4 nets?
10
90
15
75
third 4 nets?
25
fourth 4 nets?
50
50
0
4
8
12
16
Nets for Fishing
28 of 33
29
Explain again why it costs 10 lotions to make the
first 4 nets but it costs 50 lotions to make the
last 4 nets.
Lotions
100
10
90
15
As we increase the production of one good, we use
more and more resources that are less well-suited
for production of that good.
75
25
50
50
0
4
8
12
16
Nets for Fishing
30
While most PP curves are ___________ to origin
indicating an _____________ opportunity cost.
Yogurt
convex
increasing
16
it is possible to have a PP curve that is a
_______ line indicating ____________ opportunity
costs.
12
straight
constant
8
4
0
4
8
12
16
Butter
31
Growth the maximum amount of goods a country
can produce increases curve shifts right.
shoes
A
C
B
tractors
Factors that cause growth (1) increased work
force (2) increased technology (3)
increased resources (4) increased
capital goods
32
Cost the alternative we give up to make more of
the other good.
A
shoes
shoes
B
C
C
D
D
tractors
Law of Increasing Costs as we shift factors of
production from making one good to another, the
cost of the producing the 2nd good increases we
have to give up more and more to make just 1.
33
The End!
33 of 33