Production Possibilities Curves Chapter 1 Section 3

Production Possibilities A production possibilities graph show alternative ways that an economy can use it resources The production possibilities frontier is the line that shows the maximum possible output for that economy

Production Possibilities Curve Watermelons (millions of tons) Shoes (millions of pairs) 25 20 15 10 5 Production Possibilities Graph What is the opportunity cost of the decision shown here?

Watermelons (millions of tons) Shoes (millions of pairs) What is the opportunity cost of choosing to produce the combination of goods shown at point A instead of point B? Watermelons (millions of tons) Shoes (millions of pairs) 25 20 15 10 5 Production Possibilities Graph

Shoes (millions of pairs) Watermelons (millions of tons) Efficiency Shoes (millions of pairs) 25 20 15 10 5 Watermelons (millions of tons) Production Possibilities Graph Using resources in such a way as to maximize the production of goods If an economy is operating efficiently, the points will be on the PPF

Shoes (millions of pairs) Watermelons (millions of tons) Growth Growth is when more resources become available of if technology improves It causes the economy to grow The entire PPF will shift to the right Inefficiency is shown by a point inside the PPF Shoes (millions of pairs) 25 20 15 10 5 Watermelons (millions of tons) Production Possibilities Graph How does a society benefit when it invests money in the development of new technologies?

Cost The Production Possibilities Graph shows what happens when going from item to the next The movement from one point to the next will show the cost

The Law of Increasing Costs

The Law of Increasing Costs

The Law of Increasing Costs According to this diagram, what is the cost of increasing watermelon production?