1. Please take out 1 piece of graph paper
Clear your desk except for something to write with & a straight edge

2. Production Possibilities
Feb 27, 2014

3. Review Questions I do this the after nearly every discussion/lecture
You CANNOT read from your notes to answer them
Expect it
Prepare for it
Review the previous notes before class
EASY class participation points

4. Review Questions

5. What’s another term for “Resources”?
Factors of Production

6. Give me 1 of the 5 types of resources
Land
Labor
Capital
Technology
Entrepreneurship

7. What’s the basic/core problem?
SCARCITY!!!!!
Unlimited wants and limited resources

8. What’s the formal definition for “Economics”?
The study of how people and nations make choices about how to use their scarce resources to fill their needs and wants

9. All of the alternatives when a decision is made
Trade-Offs
All of the alternatives when a decision is made

10. Opportunity Costs
The next best alternative that had to be given up for the alternative that was chosen.

11. What is gained when a decision is made
Opportunity Benefit
What is gained when a decision is made

12. End of Review

13. WHAT to produce with our limited resources
3 basic/core issues/economic questions that all economies have to address
WHAT to produce with our limited resources
HOW to produce the goods and services
FOR WHOM the goods and services should be produced

14. Goods Versus Services
In this class, we will use the terms “Goods and Services” often.
What’s the difference between the two?

15. Goods
Tangible items that businesses produce and/or sell
Examples?

16. Services
Non-tangible work that businesses complete in exchange for money
Examples?

17. Production Possibilities
the alternative combination of final goods & services that could be produced using all of a country’s resources & tech.

18. The Production Possibilities CurveA B C D E F
OUTPUT OF TRUCKS 5 4 3 2 1
OUTPUT OF TANKS

19. Production Possibilities Illustrates The Principle of
Opportunity costs – we can obtain additional quantities of any desired good only by reducing the potential production of another good.

20. OUTPUT OF TRUCKS OUTPUT OF TANKS A B C D E F Step 1: give up one truck5 B 4
Step 3: give up another truck
Step 2: get two tanks C 3
OUTPUT OF TRUCKS
Step 4: get one more tank D 2 E 1 F 1 2 3 4 5
OUTPUT OF TANKS

21. The Cost of North Korea’s MilitaryP G
Reduced food output
FOOD OUTPUT N C
Military buildup O H D B
MILITARY OUTPUT

22. The Military Share of Output
0.5
0.9
1.0
1.2
2.7
2.8
3.4
3.8
4.1
12.0
16.3
Jamaica
Mexico
Japan
Canada
Germany
India
S. Korea
USA
Bosnia
China
Saudi Arabia
N. Korea
1.5
Percent of Output Allocated to Military

23. Efficiency
Efficiency means getting the maximum output of a good from the resources used in production.
Every point ON a production possibilities curve is EFFICIENT.

24. Inefficiency
A production possibilities curve shows potential output, not necessarily actual output.
If we are inefficient, actual output will be less than the potential output.

25. Countries may end up inside their production possibilities curve if resources are inefficiently used.

26. Inefficiency OUTPUT OF TANKS OUTPUT OF TRUCKS A 5 B 4 Y C 32 1 1 2 3 4 5
OUTPUT OF TANKS

27. A point outside the production possibilities curve suggests that we could get more goods than we are capable of producing!
Is this possible?!

28. Economic Growth OUTPUT OF TRUCKS OUTPUT OF TANKS A X 5
Currently not attainable B 4 C 3
OUTPUT OF TRUCKS 2 1 1 2 3 4 5
OUTPUT OF TANKS

29. Economic Growth An expansion of production possibilities. How? Land
An increase in the quantity and/or quality of a country’s factors of production
Land
Labor
Capital
Entrepreneurship
Technology

30. Economic Growth When economic growth occurs . . .
The production possibilities curve shifts outward.

31. Economic Growth
PP2
PP1
OUTPUT OF TRUCKS
OUTPUT OF TANKS

32. What would have to occur for a country’s PPC to shift outward?
An increase in quality or quantity of a country’s
Land
Labor
Capital
Entrepreneurship
Technology

33. What would have to occur for a country’s PPC to shift inward?
A decrease in quality or quantity of a country’s
Land
Labor
Capital
Entrepreneurship
Technology

37. Neatly & Somewhat Small, write the job that you decided to take