The production possibilities frontier illustrates concepts of : Scarcity - resources are limited. Choice - choices in the production of different goods need to be made. Opportunity cost - to gain more of a good, something else must be given up.

THE PRODUCT İ ON POSS İ B İ L İ T İ ES FRONT İ ER shows the maximum amount of any two products that can be produced at a given time from a fixed quantity of resources. Different Combina tions BroccoliPizza

Different Combinations BroccoliDiffPizzaDiffOpp cost Pizza Opp cost Broccoli abcdefg

Different Combinations BroccoliDiffPizzaDiffOpp cost Pizza Opp cost Broccoli abcdef = c/eg = e/c specialization is bad The takeaway from this table is that specialization is bad, because the opportunity costs are rising as we specialize. Slope of the curve = opportunity cost

Characteristics of the Production Possibilities Frontier (Summary) along 1. Points along the frontier show the trade off between two different goods for society; to get more of one, we must give up some of the other (A, B and C ). outside 2. Points outside the curve are unobtainable with given resources and technology (Point Y ). inside 3. Points inside the frontier are attainable, but do not utilize society's resources efficiently (Point X).

Ideas Illustrated by the Production Possibilities Frontier: Efficiency - inside vs. on the frontier Tradeoffs - movement along the frontier Opportunity Cost - slope of the frontier Economic Growth - changing position of the frontier