Standard 1 Understand the fundamental concepts relevant to the development of a market economy SS.912.E.1.2 Analyze production possibilities curves to explain choice, scarcity, and opportunity costs

Definitions: Scarcity- less of a good or service than people would like to have Opportunity cost- value of next-best alternative not chosen

Video: Cast Away-specialization

PPC also called PP Frontier Graph:

A single point is either inefficient, efficient, or not attainable (given current resources)

When constructing a PPC, all factors of production are held constant When factors change, PPC shifts More or better factors- shift right Less or worse factors- shift left

Exercise: Name one thing that would allow Tom Hanks to produce more fire, one thing to produce more food, and one thing to produce more food AND fire simultaneously. Draw three separate PPCs to illustrate.

Graphs:

Video: A Knight’s Tale

Most PPCs are “bowed out” Increasing opportunity costs occur because resources being pulled from other uses are not as productive in their new uses