DateDate: February 7, 2013: February 7, 2013

TopicTopic: Production Possibilities : Production Possibilities CurvesCurves

AimAim: How does a production : How does a production possibilities curve reflect an possibilities curve reflect an

economy?economy?

Do NowDo Now: Handout. : Handout.

HI, IM BILLY. IM LAZY. I WAS BORN WITH MANY TALENTS. I CAN SEW, SING, DANCE, CATCH A FRISBEE WITH MY TEETH BUT I DON’T PURSUE THESE TALENTS BECAUSE OF MY LAZINESS. IM AN INEFFICIENT PERSON…

HOW CAN OUR FRIEND BILLY BECOME AN EFFICIENT INDIVIDUAL?

Efficiency•Efficiency using resources to maximize the

production or output of goods and services.•What would happen if suddenly an economy

was not efficient? Can you give an example?•Underutilization using fewer resources

than an economy is capable of using.

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Production Possibilities Curves, Frontiers, and Graphs

• Production Possibilities Curve (or frontier) An economist decides which goods or services to examine – two (2).

• Alternative ways to use a economy’s resources.

• Trade-offs between any two items produced.

LET’S DO ONE OF THESE ON OUR OWN

Law of Increasing Costs•As production switches from one item to

another more and more resources are necessary to increase production of the second item….

HOMEWORK