1. Production Possibilities Curve
What to produce...in what amount?

2. What Goods to Produce?
Economists look at this question and create what is known as the Production Possibility Curve or Frontier

3. Production Possibilities Curve
Peanuts
At this Point What is Being
Produced in Greater Quantity?
How many Oranges are being produced at this point?
Why does the Production of these two products follow a curve?
It is bowed out to denote increasing costs
Representation of production at its most efficient
Important to realize that production can also take place anywhere within the curve.
Oranges

4. Production Possibilities Curve
Why would the curve shift inward?
Peanuts
Problems with Labor
Loss of Land Resources
Machinery Breaks Down
When the economy/business
uses less resources than the
economy is capable of using it experiences…
UNDERUTILIZATION
Oranges

5. Production Possibilities Curve
Why would the curve shift outward?
Peanuts
Increase in the Amount or Quality of Resources
More Labor (Population)
Increased Productivity from Labor
New or Better Resources
New or Better Capital
Better Education or Health of Labor
Technological Advancement
Future Production
Possibilities Frontier
Oranges

6. Production Possibilities Graph
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph
a (0,15) 15 8 14
b (8,14) 14 18 20 21 12 9 5
A production
possibilities frontier
c (14,12)
d (18,9)
e (20,5)
f (21,0)