1. Production Possibilities Frontier Economics Unit One: Basic Economic Concepts

2. Production Possibilities Curve (Production Possibilities Curve and Production Possibilities Frontier are used interchangeably) Production Possibilities Curve is a graphic representation of all possible combinations of two goods that an economy can produce. The line shows the maximum possible output for a specific economy EOC study guide Basic Economic Concepts #3 links smiles

3. Production Possibilities Frontier demonstrates scarcity Production possibilities graphs show alternative ways to use an economy’s resources The axes display any pair of goods and services Smiles and links Computers and cars Farm goods and factory goods Military goods and consumer goods links smiles

4. PPF Illustrates Opportunity Costs and Marginal Thinking What is the opportunity cost of moving your production from Q to R? What is the opportunity cost of moving your production from T to V?

5. PPF Illustrates Efficiency Efficiency is the use of resources so as to maximize the production of goods and services. Which point(s) shows this economy working at its most efficient level of production? Which point(s) indicates an underutilization of resources? Which point(s) shows an unattainable level? Most efficient Underutilization of resources Impossible!

6. PPF Illustrates Growth A production possibilities curve reflects the country’s current production possibilities What happens when the quantity of resources (factors of production) changes? When more natural resources (land) become available? When the working age population (labor) increases? When a new technology (physical capital) is invented?

7. PPF Can Shrink What happens when the quantity of resources (factors of production) decreases? When more natural resources (land) are destroyed? Fire, earthquake, flood When the number of workers (labor) decreases? Baby boomers retire, large numbers of illegal immigrants shipped out of the country When a human capital decreases? Large numbers of students don’t go to college and don’t have the knowledge necessary to fill the previous generations shoes

8. What does it look like if Only one good’s output is increased? Let’s say a new machine is created that speeds up the time it takes to manufactures guns This new technology does NOT however effect the production of butter Now what happens to the frontier????