PowerPoint #2: Factors of Production Economics Unit 1

Essential Question Explain the Factors of Production and the Production Possibilities Curve

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Factors of Production (Scarce Resources) Land - natural resources of “gifts of nature” Labor - physical and mental talents of workers Capital - tools, machinery, manufactured goods used to produce consumer goods Investment Entrepreneurial Ability - the idea or “sparkplug”, innovation, risk

Watch this video clip and explain each Factor of Production https://www.youtube.com/watch?v=7c4NRcKDrzw&t=2s

Production Possibilities Curve The Production Possibilities Curve (ppc) shows the maximum combination of goods and services that can be produced from a given amount of resources. Assumptions: Full Employment Fixed Resources Fixed Technology Two Goods Consumer Goods (Pizzas) Capital Goods (Industrial Robots)

How does a production possibilities curve work? The production possibilities curve shows the opportunity costs of producing two goods in an economy. An economy that is perfectly efficient will produce on the curve instead of inside or below the curve

The Guns versus Butter model An example of a simple production–possibility frontier. Demonstrates the relationship between a nation's investment in defense and civilian goods. In this example, a nation has to choose between two options when spending its finite resources.

Production Possibilities Model Optimal Allocation of Resources a c 15 10 5 MC MB = MC e b Marginal Benefit & Marginal Cost MB d Quantity of Pizza 1 2 3

Watch this video clip and explain how scarcity and choices effect producers https://www.youtube.com/watch?v=tW4G5IPpzFY&t=1s

Production Possibilities Table Robots Pizza 10 0 9 1 7 2 4 3 0 4

Production Possibilities Model Production Possibilities Curve A’ 14 13 12 11 10 9 8 7 6 5 4 3 2 1 G 1.1 B’ Unattainable A Economic Growth B C’ C Industrial Robots D’ D Now Attainable Attainable E E’ 0 1 2 3 4 5 6 7 8 9 Pizzas

Production Possibilities Model Production Possibilities Curve A’ 14 13 12 11 10 9 8 7 6 5 4 3 2 1 B’ Unattainable A Law of Increasing Opportunity Cost B C’ C Industrial Robots D’ Shape of the Curve D Attainable W 1.2 E E’ 0 1 2 3 4 5 6 7 8 9 Pizzas

Production Possibilities Model Production Possibilities Curve A’ 14 13 12 11 10 9 8 7 6 5 4 3 2 1 B’ Unattainable C’ Industrial Robots U D’ Under or Unemployment E’ 0 1 2 3 4 5 6 7 8 9 Pizzas

Answer the Essential Question in the minimum of five sentences Explain the Factors of Production and the Production Possibilities Curve