1. Production Possibilities Curve

2. Law of Increasing Costs This imaginary society produces only 2 items: hot dogs and bicycles. The table shows that a certain amount of bicycles can be manufactured when a certain amount of hot dogs are manufactured, and no more of either can be produced. What is the opportunity cost, in terms of hot dogs, for moving from producing 8 bicycles to producing 12 bicycles? Hot Dogs Bicycles10090755000481216

3. Watermelons (millions of tons) Shoes (millions of pairs) 25 20 15 10 5 0 252015105 Production Possibilities Graph Watermelons (millions of tons) 0 a (0,15) 15 814 b (8,14) 14 18 20 21 12 9 5 0 A production possibilities frontier c (14,12) d (18,9) e (20,5) f (21,0) Production Possibilities  A production possibilities graph shows alternative ways that an economy can use its resources.  The production possibilities frontier is the line that shows the maximum possible output for that economy.

4.  Production Possibilities Curve illustrates trade-offs and opportunity costs.  2 assumptions  the amount of available resources and technology will not change during the time studied  all of the resources are being used to maximum efficiency

5. Shoes (millions of pairs) 25 20 15 10 5 0 252015105 Watermelons (millions of tons) Production Possibilities Graph g (5,8) A point of underutilization c (14,12) d (18,9) e (20,5) f (21,0) a (0,15) b (8,14) SEfficiency  Efficiency means using resources in such a way as to maximize the production of goods and services. An economy producing output levels on the production possibilities frontier is operating efficiently.

6.  Identify the letters that corresponds with each of the following. An inefficient use of resourcesAn inefficient use of resources A currently impossible point of productionA currently impossible point of production Production of mostly X and little YProduction of mostly X and little Y Production of mostly Y and little XProduction of mostly Y and little X  What would happen to the curve if resources become unavailable?  What would happen to the curve if improvements in technology occur or new resources become available?

7. Shoes (millions of pairs) 25 20 15 10 5 0 252015105 Watermelons (millions of tons) Production Possibilities Graph T Future production Possibilities frontier c (14,12) d (18,9) e (20,5) f (21,0) a (0,15) b (8,14) SGrowth  Growth If more resources become available, or if technology improves, an economy can increase its level of output and grow. When this happens, the entire production possibilities curve “shifts to the right.”

9. Exchange  Why do people trade?  Why do nations trade?  Are most countries self-sufficient?  How do you deal with your lack of self- sufficiency?  Why are nations economically interdependent?  What is barter?  Why do we need money?  Why is credit useful?  What determines value?

10. Warm up: write down the following and tell whether it represents Land, Labor, Capital or Entrepreneurship. 1. John Rockefeller of Standard Oil 2. Crude oil 3. A factory building 4. A teacher giving a lesson 5. A wrench used to fix a pipe 6. Wool on a sheep 7. A plumber fixing a leak 8. A young woman getting a small business loan to start a consignment store