Lesson 1.5 Production Possibilities Curve SSEF2 A. ILLUSTRATE BY MEANS OF A PRODUCTION POSSIBILITIES CURVE THE TRADE OFFS BETWEEN TWO OPTIONS.

Lets look at the PPF…

Lets have a go…  My Time PPC: On your graph paper, identify a finite number of hours available for after-school, identify two activities in which you SHOULD engage during their after-school hours.  Using the hours available as the basis for their production possibilities curve, they determine the possible trade-offs between two activities and illustrate these on the curve.  Identify situations that could cause them to produce at a point inside their Production Possibilities Curve (PPC), discuss the dangers of temporarily trying to reach a point outside the curve, and identify strategies that would allow you to shift their PPC outward.

The PPF explained a bit more…

Production Possibility Frontier

Review Definition  Slope is the steepness of a line as known as:  m==  A line going uphill from left to right has a positive slope  A line going downhill from left to right has a negative slope Vertical Change Horizontal Change rise run

Start with the lower point and count how much you rise and run to get to the other point! 6 3 run 3 6 == rise Notice the slope is positive 1 2 Review finding slope using rise run

Introduce Slope Formula  The slope formula is m=   Where:  (x 1, y 1 ) and (x 2, y 2 ) y 2 -y 1 x 2 -x 1

Slope Formula  To determine the slope between two points we must use: m=  Ex: Find the slope of the line that passes between (4,1) and (-2,- 2)  x2 is the x value in the second order pair and x1 is the x value in the first ordered pair. (same for y)  Ex: m=== y2-y1y2-y1 x2-x1x2-x

Find the slope of the line that goes through the points (-5, 3) and (2, 1) m= y 2 -y 1 x 2 -x – (-5)

Lets Practice! Find the slope of the line that passes through (3, 5) and (-1, 4) a. 4 a. -4 b. d

Find the slope of the line that passes through: 1. ( 1,2) and (7, 9) 2. (-5, 3) and (-1,0) 3. (5,-1) and (0, 3) 4. (-3,-7) and (-8, -1) 5. (2,-5) and (7,-5) Now You Try!

© Council for Economic Education

So what does this all mean?  Slope is related to an important concept in economics called opportunity cost. O pportunity cost is the value of the next best alternative given up when a decision is made.  Using the production possibilities frontier from Slide 1, we see that as more chips are produced, a certain number of fish must be given up. Conversely, as more fish are produced, some chips are given up.  The exact amount of one good sacrificed to gain the other is the opportunity cost, and is represented by the slope of the line.

Summarize it now  Answer the questions on the handout