Chapter 1 Section 3

Slide 1 United States entered World War two in 1941 and faced an urgent task to create and produce weapons. Govt. switched the output of factories, farms, and mines from consumer needs to the production of military products.

Slide 2 In 1994 the farmers in the United States grew close to two million tons of watermelons. Economists often use graphs to analyze the trade-offs and choices that people make.

Slide 3 Graphs let us see how one value relates to another. The axes of the graphs show categories of goods and services, such as farm goods and factory goods. Can also display any pair of specific goods or services.

Slide 4 You can draw a graph to see which product will make the most in the long run. With graphs you can see which product you can focus on and make it as good as possible. If you want to produce two products but only have the workers and space for one, then you have to get rid of one of those products.

Slide 5 Production possibility graphs can show how efficient an economy is, whether the economy has grown or shrunk. A production possibility frontier can represent an economies level of efficiency or level of maximum production.

Slide 6 Underutilization can be very bad for an economy, that means people aren't buying the products that are on the self. The Production Possibility Curve can reflect the countries current production possibility as if the countries resources were frozen in time.

Slide 7 In real time the quantity of a countries resources are constantly changing all the time. If the quality of the land, labor, or capital changes, then the production possibilities curve will change. If immigrants pour in the country labor will go up so production increases.

Slide 8 Also new inventions can also change existing technology and allow workers to produce more goods and services at lower costs. When an economy grows, economists say that the entire production possibilities curve shifts to the right.

Slide 9 When a countries production capacity decreases, the curve shifts to the left. For example when a country goes to war and loses part of its land as a result. It also depends on the average age of the people that live in the country.

Slide 10 During World war two, consumer goods were in short supply as the nation shifted resources to increase production on planes, ships, artillery, and ammunition. Ration coupons were used to make sure consumers got a share of the goods.

Slide 11 If a company makes two different goods then they will take more room to make that good faster and make more of it. They will take more space and make the product that is going to sell better and then take the other product and only make alittle of it.

Slide 12 North America and Europe are the heaviest computer-using regions of the world. The law of increasing costs states that as production shifts from one item to another, one item will increase and the other will decrease.

Slide 13 IBM was the first company to substitute copper for aluminum in making semiconductors, a vital breakthrough for manufacturing faster and more-powerful computer chips. This made this company jump start into making faster computers

Slide 14 If a company is reaching its production possibilities goal easily then the next year they might move it higher so they can push themselves to make more products and money. If a company does not increase in production then they will most likely go out of business in the future.

Slide 15 A company should always keep a good look on their efficiency to see if they need to find better ways to make and sell a product. How fast you can make the product can also effect if you stay in business.

Slide 16 Production possibilities graph-a graph that shows alternative ways to use an economy’s resources Production possibilities frontier – the line on a production possibilities graph that shows the maximum possible output

Slide 17 Efficiency- using resources in such a way as to maximize the production of goods and services Underutilization- using fewer resources than an economy is capable of using Cost- to an economist, cost is the alternative that is given up because of a decision

Slide 18 Law of increasing costs- as we shift factors of production from making one good or service to another, the cost of producing the second item increases Speaking economically, note that cost is not necessarily money

Slide 15 If an economy is growing an economist might say, “The entire production possibilities curve has shifted to the right.” Concerning opportunity cost an economist might say that “choosing is refusing”

Question 1 What is a graph that shows alternative ways to use an economys resources ? Production Possibilities Graph

Question 2 What is known as the line on a production possibilities graph that shows the maximum possible output? Production possibilities frontier

Question 3 What is using in such a way as to maximize the production of goods and services? Efficiency

Question 4 What is it called when an economy uses fewer resources than it is capable of ? Underutilization

Question 5 What is the alternative that is given up instead of a decision? cost

Question 6 When we shift factors of production from making one good or service to another, the cost of producing the second item increases which is called? Law of Increasing Costs

Question 7 How is Underutilization depicted on a production possibilities frontier? It would the lowest rating because the graph graphs maximum output.

Question 8 How does a production possibilities graph illustrate how efficient an economy is? It graphs different alternatives they can produce.

Question 9 How does a production possibilities graph illustrate opportunity cost? Because it shows different ways to use things so that will be open to different costs.

Question 10 What does a country’s resources include? Its land and natural resources its work force and physical and human capital.