Warm Up Consider the planning that goes into throwing a party. If you and two other friends were planning a party, what jobs would you need to do? How would you divide up those jobs among the three of you? Would each of you do a part of every task, or would you assign different tasks to different people?

Wednesday, September 2, 2015 Objective: Students will be able to interpret a production- possibilities curve and explain the concepts of opportunity costs and scarcity. Purpose: Every decision that you make is based on opportunity cost. You can choose what your opportunity costs are based on the resources available.

Production Possibilities Graphs help us see how one value relates to another value A production possibilities curve or graph shows alternative ways to use an economy’s resources The axes of the graphs can show the categories of goods and services or capital goods and consumer goods

Drawing Production Possibilities Curves You need to decide on the two goods that you want to compare The line that goes from the vertical axis to the horizontal axis is called the production possibilities frontier This line shows the combinations of two goods that a country can produce at any one time

What Production Possibilities Curves Show The PPF can show us how efficient a country is It can show whether an economy has grown or shrunk It can show the opportunity cost of a decision to produce more of one good than another good

Efficiency, Growth, and Cost A PPF represents an economy working at its most efficient level of production Efficiency means using resources in such a way as to maximize the production or output of goods (or services) Any point inside the line indicates an underutilization of resources. This means the country is using fewer resources than the economy is capable of using.

Efficiency, Growth, and Cost A PPF reflects the country’s current production possibilities as if the country’s resources were frozen in time In the real world, the quantity of resources is constantly changing (number of workers, etc) New inventions can change the existing technology to produce more goods (and services) at lower costs

Efficiency, Growth, and Cost Cost is not necessarily money Cost is the alternative we give up when we choose one option over the other We use the PPF to see the opportunity cost of choosing to produce more of one good over another good