1. Production Possibilities Curves Chapter 1 Section 3

2. Production Possibilities
A production possibilities graph show alternative ways that an economy can use it resources
The production possibilities frontier is the line that shows the maximum possible output for that economy

3. Production Possibilities Curve
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph
What is the opportunity cost of the decision shown here?

4. Watermelons (millions of tons) Shoes (millions of pairs)
What is the opportunity cost of choosing to produce the combination of goods shown at point A instead of point B?
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph

5. Shoes (millions of pairs) Watermelons (millions of tons)
Efficiency
Shoes (millions of pairs) 25 20 15 10 5
Watermelons (millions of tons)
Production Possibilities Graph
Using resources in such a way as to maximize the production of goods
If an economy is operating efficiently, the points will be on the PPF

6. Shoes (millions of pairs) Watermelons (millions of tons)
Growth
Growth is when more resources become available of if technology improves
It causes the economy to grow
The entire PPF will shift to the right
Inefficiency is shown by a point inside the PPF
Shoes (millions of pairs) 25 20 15 10 5
Watermelons (millions of tons)
Production Possibilities Graph
How does a society benefit when it invests money in the development of new technologies?

7. Cost
The Production Possibilities Graph shows what happens when going from item to the next
The movement from one point to the next will show the cost

8. The Law of Increasing Costs

9. The Law of Increasing Costs

10. The Law of Increasing Costs
According to this diagram, what is the cost of increasing watermelon production?