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Lesson Planet. For Students 11th - 12th Standards. Watch as an economics instructor uses an example of an economy producing pizzas and robots in order to Get Free Access See Review. Delve into the production possibilities curve and capital goods through the lens of this engaging presenter and the story of Monsters Inc.
The video clip uses plot points and scenes from the film in order to illustrate the concept of For Teachers 9th - 12th. Use a production possibilities curve to explain efficiency in terms of opportunity cost, consumption, and scarcity. A video shows how the Production Possibilities Curve is used to calculate opportunity cost and scarcity.
Learners then For Students 9th - 12th Standards. Demonstrate the important economic principles of the production possibilities curve, including how to calculate opportunity cost and graph curves by using a table or calculation.
Learners use a variety of methods, including videos, Help your class members make sense of the different graphs in economics, from aggregate demand and supply to the phillips curve, production possibilities curve, and business cycle. Don't underestimate the amount of content you can review in under 15 minutes! For Students 10th - 12th. In this economics activity, students respond to 12 problem solving questions regarding production possibilities and the production possibility curve.
For Students 9th - 12th. In this economics activity, students respond to 12 short answer questions after they read a brief description of long-run aggregate supply and the production possibilities curve. For Students 12th. In this economics worksheet, 12th graders respond to 15 multiple choice questions about production possiblities and opportunity costs.
With an increase in investment, what happens to aggregate demand, aggregate supply, and eventually, long-run aggregate supply? For Students 10th - 12th Standards. Learners consider production possibilities using an authentic test question from College Board.
Other questions include practicing supply and demand curves and examining the effects of inflation, employment, and other variables on a For Students 8th - Higher Ed Standards. A shopper goes to the store for that one special item only to find out it is out of stock.
The seventh lesson of a part economic series investigates the concept of supply in the marketplace. Scholars research the supply curve using a It's all about timing The first lesson of a part series on economics investigates the supply curve in business.This quiz has around twelve questions of the same topic; choose the correct answer. Resources are fixed and fully employed, and technology advances at the rate of growth of the economy overall.
Resources such as nonrenewable resources will decline, but labor remains fully employed, and technology is unchanged. Resources can vary, most resources experience times of unemployment, and technology advances, particularly during wartime.
Because damage to natural resources, such as might be caused by deforestation leading to erosion of topsoil, has shrunk the land resource. Because of unemployment or underemployment of labor, perhaps due to discrimination against employing workers of a certain race or gender.
We must decrease the production of food. This foregone food production represents the opportunity cost of the increase in the shelter. Forgot your password? Speak now. Production Possibilities Curve Practice Quiz! Please take the quiz to rate it. All questions 5 questions 6 questions 7 questions 8 questions 9 questions 10 questions 11 questions 12 questions. Feedback During the Quiz End of Quiz. Play as Quiz Flashcard. Title of New Duplicated Quiz:. Duplicate Quiz Cancel. More Production Quizzes.
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Remove Excerpt. Removing question excerpt is a premium feature. Which of the following best describes the three fundamental economic questions? Opportunity cost represents the worst of the various alternatives that must be given up when a choice is made in the context of scarcity.
A production possibilities curve shows the various combinations of output:. A production possibilities curve is drawn based on which of the following set of assumptions? Resources such as labor and capital will grow, are fully employed, and technology is unchanged. Which of the following reasons might explain why an economy would be operating inside its production possibilities curve PPC? Because shrinking population has reduced the number of productive workers in the economy.The manufacture of most goods requires a mix of all four.
Each point on the curve shows how much of each good will be produced when resources shift from making more of one good and less of the other. For example, say an economy can produce 20, oranges andapples. On the chart, that's point B. If it wants to produce more oranges, it must produce fewer apples. On the chart, Point C shows that if it produces 45, oranges, it can only produce 85, apples.
By describing this trade-off, the curve demonstrates the concept of opportunity cost. Making more of one good will cost society the opportunity of making more of the other good.
The production possibility curve portrays the cost of society's choice between two different goods. If the amount produced is inside the curve, then all of the resources are not being used. On the chart, that is point E. Layoffs can also occur, resulting in lower levels of labor being used. Other reasons can be a bit more complicated. For example, Florida has the ideal environment to grow oranges, and Oregon's climate is best for apples. Florida has a comparative advantage in orange productions, and Oregon has one in apple production.
If Florida ignored its advantage in oranges and tried to grow apples, it would force the United States to operate within its curve, and the standard of living would fall. Conversely, any point outside the PPF curve is impossible.Economic Growth and the Production Possibilities Frontier
More of both goods cannot be produced with the limited resources. On the chart, that is point F. The production possibility curve bows outward. The highest point on the curve is when you only produce one good, on the y-axis, and zero of the other, on the x-axis. On the chart, that is Point A. The economy producesapples and zero oranges. The widest point is when you produce none of the good on the y-axis, producing as much as possible of the good on the x-axis. On the chart, that is point D.
The society produces zero apples and 40, oranges. All the points in between are a trade-off of some combination of the two goods.Lavanderia a gettoni a villasimius
An economy operates more efficiently by producing that mix. The reason is that every resource is better suited to producing one good than another. Some land is better suited for apples, while other land is best for oranges.
Society does best when it directs the production of each resource toward its specialty. The more specialized the resources, the more bowed out the production possibility curve. They are likely to consider how best to use labor so there is full employment.List of responsive readings
An economy's leaders always want to move the production possibilities curve outward and to the right, and can only do so with growth.A production possibility frontier PPF shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed. A production possibility frontier is used to illustrate the concepts of opportunity cost, trade-offs and also show the effects of economic growth.
Combinations of the output of consumer and capital goods lying inside the PPF happen when there are unemployed resources or when resources are used inefficiently. We could increase total output by moving towards the PPF.
A country would require an increase in factor resourcesan increase in the productivity or an improvement in technology to reach this combination. Producing more of both goods would represent an improvement in welfare and a gain in what is called allocative efficiency.
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The Shape of the PPF and the Law of Diminishing Returns
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Opportunity Cost and the PPF Reallocating scarce resources from one product to another involves an opportunity cost If we increase our output of consumer goods i. We normally draw a PPF on a diagram as concave to the origin i. PPF and Economic Efficiency Production Possibilities A production possibility frontier is used to illustrate the concepts of opportunity cost, trade-offs and also show the effects of economic growth.
We could increase total output by moving towards the PPF Combinations that lie beyond the PPF are unattainable at the moment A country would require an increase in factor resourcesan increase in the productivity or an improvement in technology to reach this combination.
Trade between countries allows nations to consume beyond their own PPF. Subscribe to email updates from tutor2u Economics Join s of fellow Economics teachers and students all getting the tutor2u Economics team's latest resources and support delivered fresh in their inbox every morning.
You're now subscribed to receive email updates! Print page. Related Collections. You might also like. Advantages and Disadvantages of Monopoly Power Student videos. Explaining Natural Monopoly Study notes. Nature of Economics - Introductory Concepts Study notes.Galaxy font
Economics of Rail Nationalisation Study notes. Understanding Imperfect Competition Student videos. From the Blog.Lesson Purpose: The reality of scarcity is the conceptual foundation of economics. Like many academic disciplines, economics has its own language, in which the definition and usage of familiar terms — like scarcity — differ from those of everyday speech, and even from one discipline to another.
This lesson develops the definition and implications of living in a world of relative scarcity in which people must choose between alternative sets of benefits. Further, it introduces the Production Possibilities Frontier, a visual model of the costs and benefits of choosing one alternative over another. Standard 1: Students will understand that: Productive resources are limited.
Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others. Standard 2: Students will understand that: Effective decision making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something; few choices are all-or-nothing decisions. Standard 3: Students will understand that: Different methods can be used to allocate goods and services.
People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services. Students will be able to use this knowledge to: Evaluate different methods of allocating goods and services by comparing the benefits and costs of each method. Session Objectives :. Handouts and Supplemental Materials. What could you be doing instead of being here for this session? List your alternatives here.
What is the Opportunity Cost for a high school student to study one hour for Economics? What will confuse your students? We will continue the story of Adam and Eve in a later session.
Economics builds on ideas! Benchmarks: grade 8: Scarcity is the condition of not being able to have all of the goods and services one wants. It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources. Like individual, governments and societies experience scarcity. Choices involve trading off the expected value of one opportunity against the expected value of its best alternative. The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.
Benchmarks: grade Marginal benefit is the change in total benefit resulting from an action. Marginal cost is the change in total cost resulting from an action. As long as the marginal benefit of an activity exceeds the marginal cost, people are better off doing more of it; when the marginal cost exceeds the marginal benefit, they are better off doing less of it.
Benchmarks: grade 8: Scarcity requires the use of some distribution method, whether the method is selected explicitly or not. Session Objectives : Define scarcity as the fundamental economic condition, and provide examples of the importance and implications of relative scarcity.
Develop the logic that leads from scarcity to the necessity of choice. Illustrate how the economic condition forces everyone — consumers and producers — to make choices. Discuss how societies devise different systems of allocation to systematically address the necessity of choice. Demonstrate the subjectivity of distinctions between needs and wants. Discuss how allocation systems help people make choices. Illustrate the concepts of trade offs and opportunity cost.One of the central principles of economics is that everyone faces tradeoffs because resources are limited.
These tradeoffs are present both in individual choice and in the production decisions of entire economies. The production possibilities frontier PPF for short, also referred to as production possibilities curve is a simple way to show these production tradeoffs graphically.
Production Possibility Frontier (PPF)
Here is a guide to graphing a PPF and how to analyze it. Since graphs are two-dimensional, economists make the simplifying assumption that the economy can only produce 2 different goods.
Traditionally, economists use guns and butter as the 2 goods when describing an economy's production options, since guns represent a general category of capital goods and butter represents a general category of consumer goods. The tradeoff in production can then be framed as a choice between capital and consumer goods, which will become relevant later.
Therefore, this example will also adopt guns and butter as the axes for the production possibilities frontier. Technically speaking, the units on the axes could be something like pounds of butter and a number of guns. The production possibilities frontier is constructed by plotting all of the possible combinations of output that an economy can produce.
In this example, let's say the economy can produce:. The rest of the curve is filled in by plotting all of the remaining possible output combinations. Combinations of output that are inside the production possibilities frontier represent inefficient production.Cmw16gx4m2z3600c18 compatibility
This is when an economy could produce more of both goods i. On the other hand, combinations of output that lie outside the production possibilities frontier represent infeasible points, since the economy doesn't have enough resources to produce those combinations of goods.
Therefore, the production possibilities frontier represents all points where an economy is using all of its resources efficiently. Since the production possibilities frontier represents all of the points where all resources are being used efficiently, it must be the case that this economy has to produce fewer guns if it wants to produce more butter, and vice versa.
The slope of the production possibilities frontier represents the magnitude of this tradeoff. For example, in moving from the top left point to the next point down the curve, the economy has to give up production of 10 guns if it wants to produce more pounds of butter. Similar calculations can be made between the other labeled points:.
Therefore, the magnitude, or absolute value, of the slope of the PPF represents how many guns must be given up in order to produce one more pound of butter between any 2 points on the curve on average.
Economists call this the opportunity cost of butter, given in terms of guns. In general, the magnitude of the PPF's slope represents how many of the things on the y-axis must be forgone in order to produce one more of the thing on the x-axis, or, alternatively, the opportunity cost of the thing on the x-axis.
If you wanted to calculate the opportunity cost of the thing on the y-axis, you could either redraw the PPF with the axes switched or just note that the opportunity cost of the thing on the y-axis is the reciprocal of the opportunity cost of the thing on the x-axis. You may have noticed that the PPF was drawn such that it is bowed out from the origin. Because of this, the magnitude of the slope of the PPF increases, meaning the slope gets steeper, as we move down and to the right along the curve.
This property implies that the opportunity cost of producing butter increases as the economy produces more butter and fewer guns, which is represented by moving down and to the right on the graph. Economists believe that, in general, the bowed-out PPF is a reasonable approximation of reality. This is because there are likely to be some resources that are better at producing guns and others that are better at producing butter.
If an economy is producing only guns, it has some of the resources that are better at producing butter producing guns instead.
To start producing butter and still maintain efficiency, the economy would shift the resources that are best at producing butter or worst at producing guns first.
Because these resources are better at making butter, they can make a lot of butter instead of just a few guns, which results in a low opportunity cost of butter.In business analysis, the production possibility frontier PPF is a curve that illustrates the variations in the amounts that can be produced of two products if both depend upon the same finite resource for their manufacture.
PPF also plays a crucial role in economics. It can be used to demonstrate the point that any nation's economy reaches its greatest level of efficiency when it produces only what it is best qualified to produce and trades with other nations for the rest of what it needs. That is, there are just enough apple orchards producing apples, just enough car factories making cars, and just enough accountants offering tax services. If the economy is producing more or less of the quantities indicated by the PPF, resources are being managed inefficiently and the nation's economic stability will deteriorate.
The production possibility frontier demonstrates that there are, or should be, limits on production. An economy, to achieve efficiency, must decide what combination of goods and services can and should be produced. In business analysis, the PPF operates under the assumption that the production of one commodity can only increase if the production of the other commodity decreases, due to limited available resources.
Thus, PPF measures the efficiency with which two commodities can be produced simultaneously. This data is of importance to managers seeking to determine the precise mix of goods that most benefits a company's bottom line.Np notes template
The PPF assumes that technological infrastructure is constant, and underlines the notion that opportunity costs typically arise when an economic organization with limited resources must decide between two products. However, the PPF curve does not apply to companies that produce three or more products vying for the same resource. The PPF is graphically depicted as an arc, with one commodity represented on the X-axis and the other represented on the Y-axis.
Each point on the arc shows the most efficient number of the two commodities that can be produced with available resources. Economists use PPFs to demonstrate that an efficient nation produces what it is most capable of producing and trades with other nations for the rest.
For example, if a non-profit agency provides a mix of textbooks and computers, the PPF may show that it can produce either 40 textbooks and seven computers, or 70 textbooks and three computers. The agency's leadership must determine which item is more urgently needed. In this example, the opportunity cost of producing an additional 30 textbooks equals four computers. For another example, consider the chart below.
Imagine a national economy that can produce only two things: wine and cotton. For instance, producing five units of wine and five units of cotton point B is just as desirable as producing three units of wine and seven units of cotton. Point X represents an inefficient use of resources, while point Y represents a goal that the economy simply cannot attain with its present levels of resources.
As we can see, in order for this economy to produce more wine, it must give up some of the resources it is currently using to produce cotton point A. If the economy starts producing more cotton represented by points B and Cit would need to divert resources from making wine and, consequently, it will produce less wine than it is producing at point A. Moreover, by moving production from point A to B, the economy must decrease wine production by a small amount in comparison to the increase in cotton output.
But if the economy moves from point B to C, wine output will be significantly reduced while the increase in cotton will be quite small. Keep in mind that A, B, and C all represent the most efficient allocation of resources for the economy. The nation must decide how to achieve the PPF and which combination to use.
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