1. PRODUCTION POSSiBILITIES

2. WARM UP What was the opportunity cost of coming to school this morning? What is the opportunity cost of writing your warm up right now?

3. OBJECTIVE Demonstrate how a production possibilities curve is used to identify opportunity costs.

4. ESSENTIAL QUESTION How do societies and businesses decide where to allocate their financial resources? What is the total economic cost of producing a certain good?

5. REVIEW WHAT IS OPPORTUNITY COST? A: The total cost B: How much something costs C: The value of the next best alternative

6. What is economic cost? A.Opportunity cost plus actual cost B.How much something costs C.Opportunity cost

7. TERM PRODUCTION POSSIBILITIES FRONTIER: A diagram representing various combinations of goods and/or services an economy can produce when all productive resources are fully employed

8. ACTIVITY: YOU ARE THE PRODUCERS Need resources – Land Raw materials – paper (from trees) – Labor You will be the workers! – Capital Desk Scissors Each producer has the same resources

9. 8 Read instructions – Cut out the strip along its side borders – Cut the strip into 5 squares, using remaining solid lines – Decide whether you want to cut any of the squares into triangles, using the dotted lines You may cut some of the squares, or All of the squares, or None of the squares But only cut along the dotted lines shown. Any questions? Begin...

10. Production Possibility Schedule Did anyone produce only triangles? How many triangles did you produce? 10 How many squares were you able to produce? 0 Did anyone produce 8 triangles? How many squares did you produce? 1

11. Production Possibility Schedule Possibilities, #sq, # triangle, opportunity cost per sq A 0 10 B 1 8 2 C 2 6 2 D 3 4 2 E 4 2 2 F 5 0 2 = constant opportunity cost, 2

12. PLOT THE GRAPHY Triangle on the ‘y’, squares on the ‘x’ This is the production possibilities frontier So: what is the cost of 1 triangle? (1/2 a square) Look at points within the frontier…could they happen? What about outside the frontier?

13. Assumptions of PPF: - all resources are used – full employment - max production possible – frontier  efficient use of resources

14. ACTIVITY: Coconuts or carrots, slide 34-43 Worker 1: 1 apple, 7 banana Worker 2: 1 apple, 10 banana Worker 3: 1 apple, 15 banana Worker 4, 1 apple, 20 bananas

15. Let’s make a new graph

16. DOL L.1: Define the production possibilities frontier L.2: Explain the connection between the production possibilities frontier and opportunity costs.