1. Economic Fundamentals: Basic Concepts Production Possibility Curve
SSEF6 Explain how productivity, economic growth, and future standards of living are influenced by investment in factories, machinery, new technology, and the health, education, and training of people. d. Analyze, by means of a production possibilities curve: trade-offs, opportunity cost, growth, and efficiency.

2. Economic Fundamentals: Basic Concepts Production Possibility Curve
Opportunity costs for national/societal economic decisions are illustrated by the use of a PRODUCTION POSSIBILITIES CURVE (PPC).

3. Graph showing alternative ways to use the FoP available to an economy.
It illustrates the OC/trade-offs required in the production of one G/S over another.

4. Origin is always zero Units are always equal Label X & Y axis GUNS10
Origin is always zero
Units are always equal
Label X & Y axis 8
GUNS 6 4 2 2 4 6 8 10
BUTTER

5. This nation can only produce guns (capital goods) or butter (consumer goods)
It produces these by using the FoP available
It can produce any combination of guns or butter
All guns, no butter
All butter, no guns
Some guns, some butter 10 8
GUNS 6 4 2 2 4 6 8 10
BUTTER

6. GUNS BUTTER 10 A 8 B 6 C 4 D 2 E 2 4 6 8 10 This is the PPC
It represents ALL possible combinations of guns and butter this country can produce at one point in time A 8 B
GUNS 6 C 4 D 2 E 2 4 6 8 10
BUTTER

7. 10
It does not show past or future performance. For that, we have to add a new curve.
To help us with that, let me introduce you to… 8
GUNS 6 4 2 2 4 6 8 10
BUTTER

8. Increase right, decrease left
IRDL the turtle
If it is a
DECREASE
in production the curve moves to the
LEFT
If it is an
INCREASE
in production, then the curve moves to the
RIGHT
Increase right, decrease left

9. GUNS BUTTER 10 Increases indicate growth from… Growing population
Technology
Lower taxes
Discovery of resources
Winning a war 8
GUNS 6 4 2 2 4 6 8 10
BUTTER

10. GUNS BUTTER 10 Decreases indicate contraction from…
Diminishing population
Higher taxes
Losing a war
Natural disaster 8
GUNS 6 4 2 2 4 6 8 10
BUTTER

11. 10
In some cases countries do not use their resources efficiently; this is called underutilization and represented by this point within the PPC.
What a country cannot do is produce more than the resources it has available; this is called impossible and is represented by this point outside the PPC. 8
GUNS 6 4 2 2 4 6 8 10
BUTTER

12. Just a few more things…
Historically, our PPC has constantly been shifting to the right
Remember GDP growth?
One of our biggest shifts to the right occurred following WWII
Only one time in our history has the curve moved significantly to the left, meaning our economy produced less than before.
Want to take a guess what this era was called?