1. Write This Down Production Possibilities Frontier

2. Thomas Carlyle Dismal Science

3. Write This Down Production Possibilities Frontier aka PP Curve Definition: diagram representing the maximum amount of goods/services an resources are used. economy can produce when all of its

5. Product 1 Product 2 This curve represents the maximum amount of two goods a society or business can make using all of their available resources efficiently.

6. Study Fun Nerd AP Student Regular student Slacker

7. Write This Down Production Possibilities Frontier aka PP Curve Definition: diagram representing the maximum amount of goods/services a resources are used. economy can produce when all of its It represents: Opportunity Cost ● Trade offs = all alternative activities opportunity cost = next highest valued

8. For a country or individual company, this model may show decision on how much of two products to produce. show the investment choice between capital and consumer goods Consumer goods Capital goods Tivos ipods Or….

9. Capital Goods Consumer Goods = Human Made resources used to produce goods and services goods intended for final use by consumers

10. Write This Down Production Possibilities Frontier aka PP Curve Definition: diagram representing the maximum amount of goods/services a resources are used. economy can produce when all of its It represents: Opportunity Cost ● Trade offs = all alternative activities opportunity cost = next highest valued Capital Goods = Human made resources i.e. production tools, machines, equipment used to produce goods and services

11. Write This Down Capital Goods = Human made resources i.e. production tools, machines, equipment used to produce goods and services Consumer Goods = goods intended for final i.e. ipod, xbox, french fries, etc. use by consumers rather than businesses

12. Capital Goods Consumer Goods Points on the curve are CHOICES

13. Capital Goods Consumer Goods Points on the curve are CHOICES

14. Capital Goods Consumer Goods Points on the curve are CHOICES 0 100 90 40 70 60 0 0

15. Capital Goods Consumer Goods Points on the curve are CHOICES Which point You choose depends on your goals 0 100 90 40 70 60 0 0

16. Capital Goods Consumer Goods Some choices will move the entire curve If you make more capital goods, you can use them in the future to make more consumer goods, you will be capable of producing more

17. You must make yourself worse off in the short run, to make yourself better off in the long run.

18. You must make yourself worse off in the short run, to make yourself better off in the long run.

20. http://www.bradyworld.com/cover/minnow.jpg The ship set ground on the shore of this uncharted desert isle

21. With Gilligan,the Skipper too,the millionaire and his wife.. the movie star, the professor &MaryAnn Here on..

22. Gilligan and the Skipper had to eat…. The 1 st day, they spent 6 hours fishing

23. But, only caught one fish… On the 2 nd day, the Skipper went to fish again..

24. http://www.tasaday.com/images/_sl-003.jpg http://www.coracle-fishing.net/corac-pix2/net-11x.jpg Gilligan decided to not eat Instead he collected vines The 3 rd day he was VERY hungry, but instead of eating he made nets from the vines…

25. http://www.tasaday.com/images/_sl-003.jpg http://www.coracle-fishing.net/corac-pix2/net-11x.jpg http://www.surfingforlife.com/g/cult_b10.jpg Gilligan decided to not eat Instead he collected vines On the 4 th day, nearly starving… he used his net

26. http://www.zeroimpactproductions.com/seine-over-freezer.jpg He caught so many fish that he could spend more time doing other things…

27. http://www.riveroflifefarm.com/images/lodging/th/th2/tree-house-summer.jpg

28. If the PP shifts outward This is GOOD! = economic growth Capital Goods Consumption Goods

29. Capital Goods Consumption Goods If the PP shifts inward This is BAD!! = economic decline

30. Write This Down Capital Goods = Human made resources i.e. production tools, machines, equipment used to produce goods and services Consumer Goods = goods intended for final i.e. ipod, xbox, french fries, etc. use by consumers rather than businesses

31. Write This Down Consumer Goods = goods intended for final i.e. ipod, xbox, french fries, etc. use by consumers rather than businesses Economic GrowthEconomic Decline

32. Lets start with the good… Capital Goods Consumption Goods

33. Five Variables that Shift the PP Outward: 1. Increase the productive labor force (# or productivity). The parents of the baby boomers increased their future productive labor force by having a LOT of babies New regulations/methods can increase employee productivity

34. Write This Down Consumer Goods = goods intended for final i.e. ipod, xbox, french fries, etc. use by consumers rather than businesses Economic GrowthEconomic Decline

35. Write This Down Economic GrowthEconomic Decline 5 Shifters - things that will move curve out 1. Increase the productive labor force (# or productivity).

36. Five Variables that Shift the PP Outward: 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and quality of natural resources. A company could find a new mine, or get to a more pure vein…

37. Write This Down 5 Shifters - things that will move curve out 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and/or quality of natural resources.

38. Five Variables that Shift the PP Outward: 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and quality of natural resources. 3. Increase the quantity and quality of capital. A farming company could purchase more or better equipment

39. Write This Down 5 Shifters - things that will move curve out 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and/or quality of natural resources. 3.Increase the quantity and/or quality of capital.

40. Five Variables that Shift the PP Outward: 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and quality of natural resources. 3. Increase the quantity and quality of capital. 4. Increase health and education.

41. Write This Down 5 Shifters - things that will move curve out 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and/or quality of natural resources. 3.Increase the quantity and/or quality of capital. 4. Increase health and education.

42. Five Variables that Shift the PP Outward: 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and quality of natural resources. 3. Increase the quantity and quality of capital. 4. Increase health and education. 5. Increase technology.

43. Write This Down 5 Shifters - things that will move curve out 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and/or quality of natural resources. 3.Increase the quantity and/or quality of capital. 4. Increase health and education. 5. Increase technology.

44. The opposite is also true…

45. Capital Consumption Japan 1941 What capital goods did Japan produce in 1940? umbrellas for cocktail drinks What consumption goods did it produce? rice What did Japan do on December 7, 1941 ?

46. Capital Consumption Japan 1945 umbrellas for cocktail drinks rice What did the U.S. do to Japan for this dirty deed?

47. http://www.nhc.rtp.nc.us:8080/tserve/nattrans/ntimages/hiroshima.jpg http://www.archives.gov/digital_classroom/history_day/bright_ideas/images/nagasaki.gif Hiroshima Nagasaki morning of August 6, 1945 11:02 am, August 9, 1945

48. Capital Consumption Japan 1945 What do you think happened to Japan’s productive labor force?

49. Capital Consumption Japan 1945 What do you think happened to the quantity and quality of its natural resources?

50. Capital Consumption Japan 1945 What do you think happened to the quantity and quality of its capital stock?

51. Capital Consumption Japan 1945 What do you think happened to its health and education? http://hiroshima.tomato.nu/image/park_ma/e11-10.jpg

52. Capital Consumption Japan 1945 What do you think happened to its technology?

53. Capital Consumption Japan 1945 What happened to Japan’s PP?

54. Capital Goods Consumption Goods Developed countries produce capital goods Undeveloped countries produce consumption goods (i.e. food)

55. http://www.ellsworthamerican.com/archive/news2000/08-24-00/news3_08-24-00b.gif

56. Capital Goods Consumption Goods Ethiopia Produce Consume = Starve

57. Capital Goods Consumption Goods Ethiopia

58. Capital Goods Consumption Goods Ethiopia We sent food and $ which just prolonged the problem. Solution: send capital goods instead Reality: we sent trackers, but forgot to send gas

59. Capital Goods Consumption Goods Iraq Oil Sand?

60. Write This Down 5 Shifters - things that will move curve out 1. Increase the productive labor force (# or productivity). 2. Increase the quantity and/or quality of natural resources. 3.Increase the quantity and/or quality of capital. 4. Increase health and education. 5. Increase technology. A decrease in any would have opposite effect, It would shift curve inward.

61. Guns Butter Military Consumption goods

63. Write This Down The Advantages

66. Write This Down The Advantages Absolute Advantage One entity can produce something absolutely faster than or greater than another entity. Comparative Advantage One entity can produce something at a LOWER MARGINAL OPPORTUNITY COST than another entity.

67. Rum Crystal 1 million 100,000 700,000 30,000 A B 0 C 80,000 40,000 0 80,000 Ireland Puerto Rico A B C Crystal Rum ABCABC 1 million 0 700,00030,000 0 100,000 ABCABC 80,000 040,000 080,000

68. Rum Crystal 1 million 100,000 700,000 30,000 A B 0 C 80,000 40,000 0 80,000 Ireland Puerto Rico A B C IRELAND PRODUCE 1 Million Crystal 0 Rum TRADE -175,000 +35,000 CONSUME 825,000 35,000 ON THEIR OWN 700,000 30,000 ADDITIONAL W/ SPECIALIZATION & TRADE +125,000 +5,000 - - = = PUERTO RICO 0 Crystal 80,000 Rum +175,000 -35,000 175,000 45,000 40,000 +135,000 +5,000 - - = =

69. Rum Crystal 1 million 100,000 700,000 30,000 A B 0 C 80,000 40,000 0 80,000 Ireland Puerto Rico A B C 35,000 825,000 D 45,000 175,000 D IRELAND PRODUCE 1 Million Crystal 0 Rum TRADE -175,000 +35,000 CONSUME 825,000 35,000 ON THEIR OWN 700,000 30,000 ADDITIONAL W/ SPECIALIZATION & TRADE +125,000 +5,000 - - = = PUERTO RICO 0 Crystal 80,000 Rum +175,000 -35,000 175,000 45,000 40,000 +135,000 +5,000 - - = = w/ trade

70. Which country is obviously better off through this specialization and trade? Both Countries are!!! Both countries are now outside their own production capabilities. Through specialization and trade all parties are better off. Rum Crystal 1 million 100,000 700,000 30,000 A B 0 C 80,000 40,000 0 80,000 Ireland Puerto Rico A B C 35,000 825,000 D 45,000 175,000 D

71. Write This Down The Advantages Absolute Advantage One entity can produce something absolutely faster than or greater than another entity. Comparative Advantage One entity can produce something at a LOWER MARGINAL OPPORTUNITY COST than another entity. * CA is used to decide who should produce what

72. Product 1 Productively Efficient ON THE CURVE = CURVE = Inefficient or underused resources INSIDE THE Product 2 Lets discuss each part of the graph PP CURVE

73. Inside the Curve = Not using all of your resources Unemployment Discrimination in hiring - Gender (ex: women in 1950’s) - Race - Religion Unused Capital or technology (ex: laws, restrictions, bans)

74. Product 1 Productively Efficient ON THE CURVE = OUTSIDE THE CURVE = Unattainable, can’t PRODUCE. But, can CONSUME via Specialization & Trade CURVE = Inefficient or underused resources INSIDE THE Product 2 Lets discuss each part of the graph PP CURVE

75. Product 1 Productively Efficient ON THE CURVE = OUTSIDE THE CURVE = Unattainable, can’t PRODUCE. But, can CONSUME via Specialization & Trade CURVE = Inefficient or underused resources INSIDE THE Product 2 Add this PP Graph to your notes PP CURVE