1. Section 3: Production Possibilities Curves

2.  Curve = graph  Schedule = chart  Why? Because they like to sound smart!

3.  Production Probabilities Curve  It looks like a graph (remember: curve = graph)  Various ways a producer can use Land Labor Capital Products CapitalLandLabor

4.  Production Possibilities Curve  Shows what the MAXIMUM production could be!  Axes Shows goods and/or Shows services

5. Xs made  Os made  Think about it: Why do you think it’s called a frontier? FRONTIER

6.  It’s found at the outer edge of a production possibilities curve  Represents the FURTHEST you can go out to regarding production  Using all of your CURRENT resources  Using all of them at 100% capacity  It curves down to show trade-offs in increments = (margins) along the way  It’s about RIGHT HERE and RIGHT NOW

7.  Efficiency – using ALL of your resources to reach MAXIMUM production  Underutilization – NOT using ALL of your resources to reach MAXIMUM production

8.  Moving the boundary (frontier)  Growth Increase in available natural resources (land) Increase in population (labor) Breakthrough in technology (capital) Shifts the curve to the right

9.  Moving the boundary (frontier)  Contraction Decrease in available natural resources (land) Decrease in population (labor) Break down in technology (capital) Shifts the curve to the left EXACTLY THE OPPOSITE OF GROWTH

10.  The more resources you move into one product the more it costs you  Why? Some areas are better suited to produce certain goods Forcing new (but worse) areas to do this doesn’t pay off as much!

12.  Complete the writing prompt at the end of your packet … you might need to use the back of the page!