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Production Possibilities Curve Economics Mr. Alvarez.

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Presentation on theme: "Production Possibilities Curve Economics Mr. Alvarez."— Presentation transcript:

1 Production Possibilities Curve Economics Mr. Alvarez

2 What is Economics? Economics is the social science concerned with the problem of using scarce resources to attain the maximum fulfillment of society’s unlimited wants.

3 What is the PP Curve? What were the key points from the video? The Production Possibilities Curve represents the trade-offs that occur in the economy—where you have limited resources People must choose which goods and services to produce and which to forgo The Law of Increasing Opportunity Costs—the more of a product that is produced, the greater its opportunity cost (or the more of some other product or services that you are giving up) Guns/Butter and Robots/Pizza examples….

4 What does the curve look like? QUANTITY OF GUNS QUANTITY OF BUTTER At the maximum quantity of guns, all resources are employed making guns so no butter can be produced x a y b To produce some butter (a) you give up some guns (x). To produce more butter (b) you give up more guns (y). c z To produce even more butter (c) you give up more and more guns (z). The Law of Increasing Opportunity Costs

5 What happens if you produce at each of the points on the curve? QUANTITY OF GUNS QUANTITY OF BUTTER A D B C

6 Exercise 1: Independent Types of ProductionProduction Alternatives ABCDE Surfboards02468 Bombs454239300 Show this data graphically. Upon what specific assumptions is this PP Curve based? If the economy is at point C, what is the cost of one more surfboard? Explain how the curve reflects increasing opportunity costs.

7 Show this data graphically. QUANTITY OF BOMBS QUANTITY OF SURFBOARDS D E C 2 4 6 8 10 0 20 30 40 50 B A

8 Upon what specific assumptions is this PP Curve based? Full employment Productive efficiency Fixed supplies of resources Fixed technology

9 If the economy is at point C, what is the cost of one more surfboard? QUANTITY OF BOMBS QUANTITY OF SURFBOARDS D E C 2 4 6 8 10 0 20 30 40 50 B A 4.5 Bombs

10 Explain how the curve reflects increasing opportunity costs. Law of Increasing Opportunity Costs holds true. Economy must give up more and more bombs to produce surfboards.

11 Exercise 2: Teams of Two You create the types of production, data table and graph it!


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