Transcript Production Possibilities - Yorba Linda High School

Please take out 1 piece
of graph paper
Clear your desk except for
something to write with & a
straight edge
Production
Possibilities
Feb 27, 2014
Review Questions
I do this the after nearly every
discussion/lecture
 You CANNOT read from your notes to
answer them
 Expect it
 Prepare for it
 Review the previous notes before class
 EASY class participation points

Review Questions
What’s another
term for
“Resources”?
Factors
of
Production
Give me 1 of the 5 types of
resources
 Land
 Labor
 Capital
 Technology
 Entrepreneurship
What’s the basic/core problem?
SCARCITY!!!!!
Unlimited
wants and
limited resources
What’s the formal definition for
“Economics”?
 The
study of how people and
nations make choices about
how to use their scarce
resources to fill their needs and
wants
Trade-Offs
All
of the
alternatives when a
decision is made
Opportunity Costs
The
next best
alternative that had to
be given up for the
alternative that was
chosen.
Opportunity Benefit
What
is gained
when a decision is
made
End of Review
3 basic/core issues/economic questions
that all economies have to address
 WHAT
to produce with our
limited resources
 HOW to produce the goods and
services
 FOR WHOM the goods and
services should be produced
Goods Versus Services
 In
this class, we will use the terms
“Goods and Services” often.
 What’s the difference between the
two?
 Tangible
Goods
items that businesses
produce and/or sell
 Examples?
Services
 Non-tangible
work that businesses
complete in exchange for money
 Examples?
Production Possibilities
the
alternative combination
of final goods & services
that could be produced
using all of a country’s
resources & tech.
The Production Possibilities Curve
OUTPUT OF TRUCKS
5
A
B
4
C
3
D
2
E
1
0
1
2
3
OUTPUT OF TANKS
4
5
F
Production Possibilities Illustrates
The Principle of

Opportunity costs – we
can obtain additional
quantities of any desired
good only by reducing the
potential production of
another good.
OUTPUT OF TRUCKS
5
A
Step 1: give up one truck
B
4
3
2
Step 2: get two tanks
Step 3: give up another truck
C
Step 4: get one more tank
D
E
1
0
1
2
3
OUTPUT OF TANKS
4
5
F
FOOD OUTPUT
The Cost of North Korea’s
Military
A
G
P
Reduced food
output
N
C
O
Military buildup
H
D
MILITARY OUTPUT
B
The Military Share of Output
16.3
Percent of Output Allocated to Military
2.7
0.5
0.9
1.0
1.2
1.5
2.8
3.4
3.8
4.1
12.0
Efficiency

Efficiency means getting the
maximum output of a good
from the resources used in
production.
 Every point ON a production
possibilities curve is EFFICIENT.
A
Inefficiency
production possibilities curve
shows potential output, not
necessarily actual output.
 If we are inefficient, actual
output will be less than the
potential output.
Countries
may end up
inside their production
possibilities curve if
resources are inefficiently
used.
OUTPUT OF TRUCKS
Inefficiency
5
A
4
B
3
Y
2
C
Inefficiency
1
0
1
2
3
4
OUTPUT OF TANKS
5
point outside the production
possibilities curve suggests that we
could get more goods than we are
capable of producing!
 Is this possible?!
A
OUTPUT OF TRUCKS
Economic Growth
5
A
X
Currently not attainable
B
4
C
3
2
1
0
1
2
3
OUTPUT OF TANKS
4
5
Economic Growth
An expansion of production possibilities.
 How?


An increase in the quantity and/or quality of
a country’s factors of production
Land
Labor
Capital
Entrepreneurship
Technology
Economic Growth
• When economic growth
occurs . . .
• The production possibilities
curve shifts outward.
OUTPUT OF TRUCKS
Economic Growth
0
PP2
PP1
OUTPUT OF TANKS
 What
would have to occur for a
country’s PPC to shift outward?
 An
increase in quality or quantity of
a country’s
Land
Labor
Capital
Entrepreneurship
Technology
 What
would have to occur for a
country’s PPC to shift inward?
A
decrease in quality or quantity of
a country’s
Land
Labor
Capital
Entrepreneurship
Technology
Neatly & Somewhat Small, write
the job that you decided to take