You have your own country. You need to decide … do we produce …? oranges... or Cheetos? pijamas... or toasters

The ship set ground on the shore of this uncharted desert isle 3 of 31

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What was the name of the boat?

There are 4 types of resources that we can use to make goods & services: __________, __________, ___________,& _________________. What resources do you think are already there that we can use to make some goods & services? land laborcapital entrepreneurship

So these inhabitants of this island nation could decide to spend their resources…. 7 of 31

Or maybe they spend their valuable resources doing this… 8 of 31

which could get them this… Our resources are ___________ & our wants are ____________. How shall we spend our valuable resources? limited unlimited

...wants us to spend our resources making... A production possibilities curve shows the alternative ways we can use our valuable resources.

If we used all of our resources on the island to make lotion & made no nets, we could make _____ lotions. If we used all our resources to make nets, we could make ____ nets. If we made 12 nets, we would have enough resources left over to make ____ lotions

A production possibilities curve shows the alternative ways we can use our valuable _____________ resources 12 of 31

As we move along the PP curve we see the ___________ a country must make in the production of 2 commodities. trade-offs Why? If we use our resources to make 1 thing, we can’t make the other. 13 of 31

Maybe this economy will decide to produce here... goods... or here At any point along the curve, an economy is using its resources efficiently. Efficiency means it is using resources in such a way as to maximize the production of ______ & __________. services

If an economy is producing at a point inside the PPC, that indicates an underutilization of resources.

production This curve is called the ____________ _____________ curve. What would happen to possible production if this economy got many more workers? possibilities What if there was a new invention that greatly increased productivity? The PPC illustrates growth – an increase in the production capacity of a country. 16 of 31

Chap 1 – Production Possibilities Curve (date) __________ PPC -- production possibilities curve – graph that shows alternative ways to use a country’s resources. shoes PPF -- production possibilities frontier – line on the PPC graph that shows the maximum possible output. tractors A B C D Each point along curve reflects a trade-off...more shoes means fewer tractors. shoes tractors A B C D Each point along curve reflects a trade-off...more shoes means fewer tractors.

shoes tractors A B C D Efficiency – using resources to maximize production; any point along curve. Underutilization – point inside the curve; not using all resources capable of using E

Lotions Nets What would happen to possible production if this economy was at war and factories were being bombed? Where is that happening today? What if people were leaving the country to work in another country? Think: European Union A leftward shift of the PPC is bad. 19 of 31

Lotions Nets increase in work force Factors that will shift a PPC out... new technology new resources 4. increased capital goods

Lotions Nets This economy could produce at Point A or B. At which point is this economy producing more efficiently? A. B. Both are equally efficient! At which point should this economy produce if it wants to grow more quickly and shift out its PPC?

Lotions Nets It should produce at B. Why? Because nets are a ___________ good. They are used to produce other goods. A. B. capital 22 of 31

Lotions Nets Most PP curves are drawn as bowed out or ___________ to the origin. As we move along the PP curve we see the ___________ a country must make in the production of 2 commodities. trade-offs convex Why? If we use our resources to make 1 thing, we can’t make the other.

Lotions Nets for Fishing As we move more & more production into one item, the ___________________ of making that item increases. The PP curve is bowed out b/c some ____________ are better suited for the production of one good over the other. resources opportunity cost

This illustrates…. The Law of In order to get more of something, you have to give up ever-increasing quantities of something else.

Lotions Nets for Fishing What’s the opportunity cost of making the first 4 nets? What’s the cost of making the second 4 nets? third 4 nets? fourth 4 nets? 26 of 31

Lotions Nets for Fishing Explain again why it costs 10 lotions to make the first 4 nets but it costs 50 lotions to make the last 4 nets. As we increase the production of one good, we use more and more resources that are less well- suited for production of that good.

Yogurt Butter …it is possible to have a PP curve that is a _______ line indicating ____________ opportunity costs. While most PP curves are ___________ to origin indicating an _____________ opportunity cost…. convex straight increasing constant

shoes tractors A B Growth – the maximum amount of goods a country can produce increases; curve shifts right. Factors that cause growth: (1) increased work force (2) increased technology(3) increased resources (4) increased capital goods C

tractors Cost – the alternative we give up to make more of the other good. Law of Increasing Costs – as we shift factors of production from making one good to another, the cost of the producing the 2 nd good increases; we have to give up more and more to make just 1. shoes B C D A C D