1. Module 3: The Production Possibilities Curve
AP Economics
Mr. Bernstein
Module 3: The Production Possibilities Curve
September 2017

2. AP Economics Mr. Bernstein
The Production Possibilities Curve Model
A very simple model can explain a lot
Highlights the importance of trade-offs in economic analysis
Helps us understand efficiency, opportunity cost, and economic growth
There are two sources of economic growth - increases in the availability of resources and improvements in technology

3. AP Economics Mr. Bernstein
The Production Possibilities Curve

4. AP Economics Mr. Bernstein
The Production Possibilities Curve
Simplifying Assumptions
Resources and Technology are Fixed at a point in time
Economy produces only two goods
Off the curve is Not Feasible or Feasible but inefficient
On the curve is feasible and efficient

5. AP Economics Mr. Bernstein
The Production Possibilities Curve
A linear PPC means Opportunity Costs are constant
Example: Pizzas vs Bulldozers. At every level of production, the tradeoff in # of pizzas per bulldozer is the same
But not all pizzas and not all bulldozers are created at the same cost. Why?

6. AP Economics Mr. Bernstein
The Production Possibilities Curve
Concave due to “Law of increasing opportunity costs”

7. AP Economics Mr. Bernstein
Economic Growth
Expansion of an economy’s production possibilities