EQ: How does a PPC curve demonstrate opportunity cost, growth, and efficiency? Agenda: 1. Squares and Triangles Demonstration 2. Lecture: Production Possibilities Curve 3. Activity: Working Production Possibilities Problems with a partner 4. Homework--Card

Squares Triangles

Shows the alternative ways of using resources to produce the maximum amount of goods and services Demonstrates opportunity cost What is the opportunity cost of producing 1 square? 2 triangles What is the opportunity cost of producing 1 triangle? ½ a square

Opp. cost stay the same no matter how many of one product is produced. Why? Resources are easily converted.

MOST common Concave to the origin, bowed out Opp. cost increase (FOR BOTH GOODS) as you produce more of one good. How many robots does the first pizza cost? 1 The second pizza? 2 The third pizza? 3 The fourth pizza? 4 Why? Resources not easily converted

All points on the curve show productive efficiency Allocative efficiency (producing the correct amount of each good desired by society) is only one point.

Points inside the curve are attainable but INEFFICIENT Resources are not fully utilized Recession/Depression Unemployment Factories operating half- time

Points outside the curve are currently unattainable PPC can shift outward to reach unattainable points with growth of the economy. What point on this PPC will allow for more future growth? B or D B—more capital goods=more resources

Pizzas Industrial Robots Attainable Unattainable A B C E Economic Growth Now Attainable A’ B’ C’ D’ E’ Production Possibilities Curve G 1.1

Shifts outward if society has more resources (labor force increases, more capital goods, more land?) or with improved productivity Shifts inward of resources are lost (labor force decreases, natural disasters)

Use card stock LABEL Production Possibilities Curve 1 st graph—draw a PPC with constant opp. costs, use numbers 2 nd graph—draw a PPC with increasing opp. costs (make sure that they are actually increasing)—use numbers 3 rd graph—Label and discuss the following points—attainable but inefficient, efficient, unattainable (no numbers needed) 4 th graph—Show an inward shift and an outward shift, label them, and discuss out to the side (no numbers needed)