No Warm-up Today If you were not issued a textbook last week please go to the media center now and get one. I suggest you take it home. There will be a few times this semester when you will need it to do homework. If you did not take the Vocab quiz Friday, see me before or after school by Wednesday pm Get your notes out. Get 20 sheets of plain white paper Plan on the Unit 1 test Thursday.

The Production Possibilities Curve & Opportunity Cost

Today, you will create a Production Possibilities Curve A PPC shows… How many of two different G/S an economy can produce using its resources. what is POSSIBLE to PRODUCE, get it? Good A and/or Good B, socks and/or scarves, capital goods and/or consumer goods The absolute maximum of G/S combinations an economy can produce. PPC a.k.a. Production Possibility Frontier (furthest you can go) What it costs in one G/S to produce more of the other. Opportunity cost – to make more of one you have to make less of the other

Step 1: Draw chart & collect data! Goal per round = 9 Round 1 All airplanes Round 2 All hats Round 3 Both Hats Airplanes Step 1: Draw chart & collect data!

Step 2: Graph your data! Airplanes Hats Reminders: You will only have 3 data points to plot. This is okay! Connect your 3 data points with a solid line/curve. Label your 3 points appropriately (A, B, and C) Airplanes Hats

Step 3: Answer four questions! Were you given enough resources (paper, time, knowledge) to be as efficient as you wanted to be in making these paper figures? Which paper item (hat or airplane) took the most resources to make? (Remember resources include more than just paper!)

Step 3: Answer four questions! Write a combination of production (# of hats and # of airplanes) that would be unattainable given the resources provided to you today. (This would be a point outside of your PPC!) Label it Point D on your graph. Write a combination of production (# of hats and # of airplanes) that would have been inefficient production for you today. (This would be a point inside your PPC!) Label it Point E on your graph.

Origin is always zero Units are always equal Label X & Y axis Planes 10 Origin is always zero Units are always equal Label X & Y axis 8 Planes 6 4 2 2 4 6 8 10 Hats

This nation can only produce guns (capital goods) or butter (consumer goods) It produces these by using the FoP (or productive resources) available It can produce any combination of guns and butter All guns, no butter All butter, no guns Some guns, some butter 10 8 Guns 6 4 2 2 4 6 8 10 Butter

Guns Butter 10 A 8 B 6 C 4 D 2 E 2 4 6 8 10 This is the PPC It represents ALL possible combinations of guns and butter this country can produce at one point in time A 8 B Guns 6 C 4 D 2 E 2 4 6 8 10 Butter

10 The PPC does not show past or future performance. For that, we have to add a new curve. To help us with that, let me introduce you to… 8 Guns 6 4 2 2 4 6 8 10 Butter

Increase right, decrease left IRDL the turtle If it is a DECREASE in production the curve moves to the LEFT If it is an INCREASE in production, then the curve moves to the RIGHT Increase right, decrease left

Guns Butter 10 Increases indicate growth from… Growing population Technology Lower taxes Discovery of resources Winning a war 8 Guns 6 4 2 2 4 6 8 10 Butter

Guns Butter 10 Decreases indicate contraction from… Diminishing population Higher taxes Losing a war Natural disaster 8 Guns 6 4 2 2 4 6 8 10 Butter

In some cases countries do not use their resources efficiently; this is called underutilization and represented by this point within the PPC. What a country cannot do is produce more than the resources it has available; this is called impossible and is represented by this point outside the PPC. 10 8 Guns 6 4 2 2 4 6 8 10 Butter

Just a few more things… Historically, our PPC has constantly been shifting to the right Remember how our GDP has grown? The Stock Market? One of our biggest shifts to the right occurred following WWII Only one time in our history has the curve moved significantly to the left, meaning our economy produced less than before. Want to take a guess what this era was called?

The O.C. of moving from Point C to Point D is… A. butter B. guns C. neither D. both

The O.C. of moving from Point B to Point C is… A. less butter B. less guns C. more guns D. more butter B and D

If Point B is 7 guns and 1 butter, and point C is 1 gun and 7 butters, can this society produce 10 guns and 2 butters? - NO, impossible

Can this economy continue making the same number of guns shown with Point C, but increase the number of butters? - NO, impossible

Can this economy continue making the same number of butters shown with Point D, but decrease the number of guns? - YES, but inefficient