production possibilities curve.notebook · production possibilities curve.notebook 2 august 07,...

Production Possibilities Curve.notebook

1

August 07, 2015

Sep 36:54 PM

Warm Up:

Follow the instructions on the handout.

and/or

Sep 36:57 PM

We face scarcity!

Aug 294:23 PM

1) Wants are unlimited.

2) Resources are limited and fall into four categories: Land, Labor, Capital goods, and Entrepreneurship

3) There is a need to make decisions on how to allocate scarce resources.

4) Decisions lead to opportunity costs.

5) These costs are illustrated diagrammatically on a Production Possibilities Curve.

Aug 3011:41 AM

Resource Strip Activity

Possibilities Number of SquaresNumber of Triangles

Opportunity Cost per Square (# Triangles)

A

B

C

D

E

F

Aug 3011:48 AM

1

2

3

4

5

6

7

8

9

10

Num

ber o

f Triangles

1 2 3 4 5Number of Squares

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Key Idea:

What is the Production Possibilities Curve showing us?


2

August 07, 2015

Aug 293:52 PM

Production Possibilities Curve

Guns

Butter

Aug 294:25 PM

Arm

y Trucks

2

4

6

8

10

12

1 2 3

AB

C

E

F

D

Cars

Aug 3011:58 AM

Closing:Assume that one society produces two kinds of goods (watches and doughnuts) using all its resources. If the society decides to increase the production of watches, what must happen? Explain in terms of a Production Possibilities Curve.

Feb 159:13 PM

Warm Up:

What economic concepts can you see on a production possibilities curve?

Good A

Good B

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Production Possibilities Practice

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0

2

4

6

8

10

12

1 2 3 4 5 6

Good B

Good A


3

August 07, 2015

Aug 3111:49 AM

Good A

Good B

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Closing:

Socrative Exit Ticket Questions

Feb 159:36 PM

Attachments

Triangles and Squares.pdf

AP Production Possibilities Practice.pdf

LESSON FIVE

From Old MacDonald to Uncle Sam, National Council on Economic Education, New York, NY 33

SCARCITY ANDCHOICEby Liudmila Guinkel (Russia)

LESSON DESCRIPTIONIn this lesson, students participate in a role

play as producers of two goods, allowingstudents to experience scarcity. They makechoices about using their scarce resource toproduce both or one of two goods. Then theyconstruct production-possibilities curves,compute opportunity costs, and conclude thatscarcity requires choice and every choice has anopportunity cost.

AGE LEVEL15-18 years old

CONCEPTSscarcityproductive resourcesopportunity cost

CONTENT STANDARDSProductive resources are limited. Therefore

people cannot have all the goods and servicesthey want; as a result, they must choose somethings and give up others.

BENCHMARKSScarcity is the condition of not being able to

have all of the goods and services one wants. Itexists because human wants for goods andservices exceed the quantity of goods andservices that can be produced using all availableresources.

Like individuals, governments and societiesexperience scarcity because human wantsexceed what can be made from all availableresources.

People make choices because they cannothave everything they want.

Whenever a choice is made, something isgiven up.

OBJECTIVES♦ Students will define scarcity and

opportunity cost.♦ Students will identify the opportunity

cost of producing one good in terms of what isgiven up.

♦ Students will explain production-possibilities analysis.

TIME REQUIREDOne to two class periods

MATERIALS• Copies of Activities 1 – 4 for each student• Transparencies of Activities 2 - 4• Scissors and glue

PROCEDURE1. Tell students that they will become

producers. Point out that producers needresources to produce goods or provide services.

2. Give a copy of Activity 1, glue, and apair of scissors to each student. Point out thateach student has the same resources to producesquares and/or triangles. Read the instructionstogether and answer any questions. Allow a fewminutes for students to make their squaresand/or triangles.

3. Distribute a copy of Activity 2 to eachstudent. Display a transparency of Activity 2. Point out that the table is labeled “production-possibilities schedule” because it will show allthe possibilities that each student could haveproduced. Tell students to complete their tablesas you work on the transparency. Discuss thefollowing.

A. Did anyone produce only triangles? How many squares were you able toproduce? (zero) In the row for

LESSON FIVE

34 From Old MacDonald to Uncle Sam, National Council on Economic Education, New York, NY

Possibility A, enter “10” for the numberof triangles and “0” for squares.

B. Did anyone produce eight triangles? How many squares were you able toproduce? (one) In the row forPossibility B, enter “8” for the numberof triangles and “1” for squares.

C. Did anyone produce six triangles? Howmany squares were you able to produce? (two) In the row for Possibility C, enter“6” for the number of triangles and “2”for squares.

D. Did anyone produce four triangles? How many squares were you able toproduce? (three) In the row forPossibility D, enter “4” for the numberof triangles and “3” for squares.

E. Did anyone produce two triangles? Howmany squares were you able to produce? (four) In the row for Possibility E, enter“2” for the number of triangles and “4”for squares.

F. Did anyone produce only squares? Howmany triangles did you produce? (zero) In the row for Possibility F, enter “0” forthe number of triangles and “5” fortriangles.

Answers for Activity 2 table

PossibilitiesNumber

ofSquares

Numberof

Triangles

OpportunityCost perSquare

A 0 10 ―B 1 8 2C 2 6 2D 3 4 2E 4 2 2F 5 0 2

4. Point out that the table represents theproduction alternatives that are possible, hencethe name production-possibilities schedule. Although each alternative was possible, eachstudent could produce only one alternative giventhe limited resources.

5. Explain that students are experiencingthe basic economic problem in this activity –scarcity. Define scarcity as the condition of notbeing able to have all of the goods and servicesone wants. It exists because human wants forgoods and services exceed the quantity of goodsand services that can be produced using allavailable resources.

6. Have students identify scarce resourcesused to produce squares and triangles. (students, scissors, glue, resource strips, tables,classroom, electricity, and so on)

7. Explain that scarcity of resourcesnecessitates decision making. Remind studentsthat they could choose only one alternativeamong all possibilities. Once a productionalternative is selected another alternative cannotbe selected because the available resources arelimited.

8. Point out that whenever someone makesa personal decision to use limited resources (i.e.,an economic choice), an opportunity cost isincurred. Opportunity cost is the highestvalued alternative that must be foregone becauseanother option is chosen.

9. Ask students to identify the opportunitycost of producing the first square. (Twotriangles must be given up.) Enter “2” in thefourth column in the row for Possibility B. Have students compute the opportunity cost ofproducing each additional square. (Theopportunity cost of getting an additional squarein terms of sacrificed triangles is always thesame –two triangles.)

10. Tell students to plot the productionpossibilities on the graph on Activity 2, labelingeach point. Tell them to connect the points. Point out that the resulting line is called aproduction-possibilities curve – a graphicalrepresentation of the production possibilities.

11. Display Visual 1 and explain that thepoints on the curve represent combinations of

LESSON FIVE


the two goods that are possible. Discuss thefollowing.

A. What does a producer gain by producingpoint C instead of point B? (one square)

B. What is the opportunity cost ofproducing point C instead of point B? (two triangles)

C. What does a producer gain by producingpoint D instead of point E? (twotriangles)

D. What is the opportunity cost ofproducing point D instead of point E? (one square)

E. How many squares and triangles arerepresented by point I? (one square andfour triangles)

Note to teacher: Production-possibilitiescurves may be straight or curved (bowed-outward) lines. A straight line has constantopportunity costs. A bowed-outward lineshows increasing opportunity costs as moreof one good is produced.

12. Explain that the production-possibilitiescurve represents a limit on the alternatives thatcan be produced because of scarce resources –each producer has only one resource strip.

13. Have students compare points C and Oand then compare points I and D. (Point Crepresents six triangles and two squares, andpoint O represents the same amount of trianglesand three squares. Point I represents fourtriangles and one square, and point Drepresents the same amount of triangles andthree squares.) Discuss the following.

A. Why can any producer produce point C? (Each producer has enough resources.)

B. If a producer produced possibility C,would the producer use all resourcesavailable? (Yes.)

C. Would combination O be preferable tocombination C? (Yes because morewants could be satisfied.)

D. Why can’t any producer produce thecombination of triangles and squaresrepresented by point O? (There aren’tenough resources.)

E. Can any producer choose to produceeither point I or point D? (Yes, they arepossible.)

F. Why would point I be a less preferredchoice than point D? (Resources arewasted. The producer is not getting asmuch as possible from the availableresources. It is inefficient.)

G. How might a producer be able toproduce point O? (if the producer gotimproved technology or more resources)

14. Point out that a production-possibilitiesschedule or table shows the maximumcombinations of the two goods that can beproduced, assuming a given state of technologyand a given amount of resources. All points arepossible, but only one may be chosen, just asstudents could only choose one combination oftriangles and squares.

15. Explain that societies experience scarcityas well as individuals. Every economy has alimited amount of resources and must makedecisions about what to produce.

CLOSUREReview the main points of the lesson.

1. What is scarcity? (the condition of notbeing able to have all of the goods and servicesone wants)

2. Why does scarcity exist? (Human wantsfor goods and services exceed the quantity ofgoods and services that can be produced usingall available resources.)

3. What is opportunity cost? (the highestvalued alternative that must be foregonebecause another option is chosen)

4. What was the opportunity cost of anadditional square in this lesson? (two triangles)

LESSON FIVE


5. Why do choices have an opportunitycost? (People must give up some desirablethings in order to have more of other thingsbecause of limited resources.)

ASSESSMENT1. Assume that one society produces two kinds

of goods (watches and doughnuts) using allits resources. If the society decides toincrease the production of doughnuts, thenthe production of watches:a. Can be increased.b. Must be reduced. *c. Must remain the same.

Use the following production-possibilitiesschedule to answer the following questions.

Cakes(in thousands)

Bicycles(in hundreds)

0123

151390

2. What is the opportunity cost of producingthe first one thousand cakes?a. 200 bicycles *b. 500 bicyclesc. 900 bicyclesd. 1500 bicycles

3. Which of the following combinations ofproducing cakes and bicycles is impossible?a. 1000 cakes and 1000 bicyclesb. 2000 cakes and 1300 bicycles *c. 2000 cakes and 500 bicyclesd. 2000 cakes and 800 bicycles

EXTENSIONProvide the following table to students.

PossibilitiesNumber

ofSquares

Numberof

Triangles

OpportunityCost perSquare

A 0 12 ―B 1 10C 2 8D 3 6E 4 4F 5 0

Tell students to plot the new production-possibilities curve on Activity 2. Have studentsprovide possible causes for a shift in the curve. (increase in resources, improved technology)

LESSON FIVE


Activity 1Resource Strips

Instructions

Cut out the entire table on theoutside.

Fold the table along the dashedline.

Glue the two sides together, lineson the outside.

Cut out squares and/or triangles –your choice.

LESSON FIVE


Activity 2All the Possibilities

Production-Possibilities Schedule

Possibilities Number ofSquaresNumber ofTriangles

OpportunityCost per Square

(# triangles)A ―BCDEF

Production-Possibilities Curve

10987654321

0 1 2 3 4 5

Number ofTriangles

Number ofSquares

LESSON FIVE


Visual 1Production-Possibilities Curve

Production-Possibilities Curve

A

B

C O

I D

E

10987654321

F0 1 2 3 4 5

Number ofTriangles

Number ofSquares

SMART Notebook

1 Microeconomics LESSON 2 � ACTIVITY 2UNIT

Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y. 7

Scarcity necessitates choice. Consuming or producing more of one thing means consuming or pro-

ducing less of something else. The opportunity cost of using scarce resources for one thing instead of

something else is often represented in graphical form as a production possibilities curve.

Part A

Use Figures 2.1 and 2.2 to answer these questions. Write the correct answer on the answer blanks, or

underline the correct answer in parentheses.

1. If the economy represented by Figure 2.1 is presently producing 12 units of Good B and zero units

of Good A:

(A) The opportunity cost of increasing production of Good A from zero units to one unit is the

loss of _______ unit(s) of Good B.

(B) The opportunity cost of increasing production of Good A from one unit to two units is the


(C) The opportunity cost of increasing production of Good A from two units to three units is the


(D) This is an example of (constant / increasing / decreasing / zero) opportunity cost per unit for

Good A.

Scarcity, Opportunity Cost and Production Possibilities Curves

Adapted from Phillip Saunders, Introduction to Microeconomics: Student Workbook, 18th ed. (Bloomington, Ind., 1998). Copyright

©1998 Phillip Saunders. All rights reserved.

10

12

210 3GOOD A

GO

OD

B

4 5 6

6

8

2

4

Figure 2.1

Production Possibilities Curve 1

8 Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y.

1

2. If the economy represented in Figure 2.2 is presently producing 12 units of Good B and zero units

of Good A:

(A) The opportunity cost of increasing production of Good A from zero units to one unit is the


(B) The opportunity cost of increasing production of Good A from one unit to two units is the


(C) The opportunity cost of increasing production of Good A from two units to three units is the

loss of ________ unit(s) of Good B.

(D) This is an example of (constant / increasing / decreasing / zero) opportunity cost per unit for

Good A.

Microeconomics LESSON 2 � ACTIVITY 2 (continued)UNIT

10

12

10GOOD A

GO

OD

B

2 3

6

8

2

4

Figure 2.2



1

Part B

Use the axes in Figures 2.3, 2.4 and 2.5 to draw the type of curve that illustrates the label above each

axis.


GOOD A

Increasing opportunity cost per unit

of Good B

GO

OD

B

Figure 2.3


GO

OD

B

GOOD A

Zero opportunity cost per unit

of Good B

Figure 2.4


GOOD A

Constant opportunity cost per unit

of Good B

GO

OD

B

Figure 2.5


10 Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y.

1

Part C

Use Figure 2.6 to answer the next five questions. Each question starts with Curve BB' as a country’s

production possibilities curve.

3. Suppose there is a major technological breakthrough in the consumer-goods industry, and the

new technology is widely adopted. Which curve in the diagram would represent the new produc-

tion possibilities curve? (Indicate the curve you choose with two letters.) __________

4. Suppose a new government comes into power and forbids the use of automated machinery and

modern production techniques in all industries. Which curve in the diagram would represent the

new production possibilities curve? (Indicate the curve you choose with two letters.) __________

5. Suppose massive new sources of oil and coal are found within the economy, and there are major

technological innovations in both industries. Which curve in the diagram would represent the

new production possibilities curve? (Indicate the curve you choose with two letters.) __________

6. If BB' represents a country’s current production possibilities curve, what can you say about a point

like X? (Write a brief statement.)

7. If BB' represents a country’s current production possibilities curve, what can you say about a point

like Y? (Write a brief statement.)


B

C

A´CONSUMER GOODS

CA

PIT

AL

GO

OD

S

B´ D´ C´

A

Y

X

Figure 2.6

Production Possibilities Curve: Capital Goods and Consumer Goods


1

Part D

Use Figure 2.7 to answer the next three questions.

8. What change could cause the production possibilities curve to shift from the original curve (XX')

to the new curve (YY')?

9. Under what conditions might an economy be operating at Point Z?

10. Why might a government implement policy to move the economy from Point B to Point A?


X

Y

CONSUMER GOODS

CA

PIT

AL

GO

OD

S

X´ Y´

Z

A

B

Figure 2.7

Production Possibilities Curve: Capital Goods and Consumer Goods

SMART Notebook

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