1. PowerPoint #2: Factors of Production
Economics
Unit 1

2. Essential Question
Explain the Factors of Production and the Production Possibilities Curve

3. €
Some money song
E¢ONOMIC$

4. Factors of Production (Scarce Resources)
Land - natural resources of “gifts of nature”
Labor - physical and mental talents of workers
Capital - tools, machinery, manufactured goods used to produce consumer goods
Investment
Entrepreneurial Ability - the idea or “sparkplug”, innovation, risk

5. Watch this video clip and explain each Factor of Production

6. Production Possibilities Curve
The Production Possibilities Curve (ppc) shows the maximum combination of goods and services that can be produced from a given amount of resources.
Assumptions:
Full Employment
Fixed Resources
Fixed Technology
Two Goods
Consumer Goods (Pizzas)
Capital Goods (Industrial Robots)

7. How does a production possibilities curve work?
The production possibilities curve shows the opportunity costs of producing two goods in an economy.
An economy that is perfectly efficient will produce on the curve instead of inside or below the curve

8. The Guns versus Butter model
An example of a simple production–possibility frontier.
Demonstrates the relationship between a nation's investment in defense and civilian goods.
In this example, a nation has to choose between two options when spending its finite resources.

10. Production Possibilities Model
Optimal Allocation of Resources a c 15 10 5 MC
MB = MC e b
Marginal Benefit & Marginal Cost MB d
Quantity of Pizza

11. Watch this video clip and explain how scarcity and choices effect producers

12. Production Possibilities Table
Robots Pizza

13. Production Possibilities Model
Production Possibilities Curve A’ 14 13 12 11 10 9 8 7 6 5 4 3 2 1
G 1.1 B’
Unattainable A
Economic
Growth B C’ C
Industrial Robots D’ D
Now Attainable
Attainable E E’
Pizzas

14. Production Possibilities Model
Production Possibilities Curve A’ 14 13 12 11 10 9 8 7 6 5 4 3 2 1 B’
Unattainable A
Law of Increasing
Opportunity Cost B C’ C
Industrial Robots D’
Shape of
the Curve D
Attainable
W 1.2 E E’
Pizzas

15. Production Possibilities Model
Production Possibilities Curve A’ 14 13 12 11 10 9 8 7 6 5 4 3 2 1 B’
Unattainable C’
Industrial Robots U D’
Under or
Unemployment E’
Pizzas

16. Answer the Essential Question in the minimum of five sentences
Explain the Factors of Production and the Production Possibilities Curve