Economics Graphs

ECONOMICS TOPIC 1 LESSON 3

PRODUCTION POSSIBILITIES

ESSENTIAL QUESTION

How does scarcity affect everyone? What is opportunity cost?

OBJECTIVES

Interpret a production possibilities curve.

Explain how production possibilities curves show efficiency, growth, and opportunity cost.

Explain why a country’s production possibilities depend on its resources and technology.

Production Possibilities

To decide what and how much to produce, economists use a tool known as a production possibilities curve.

Production Possibilities

Economists often use graphs to analyze the choices and trade-offs that people make. Why? Because graphs help us see how one value relates to another value. A production possibilities curve is a graph that shows alternative ways to use an economy’s productive resources.

Fill in the Blanks

Drawing a Production Possibilities Curve

To draw a production possibilities curve, an economist begins by deciding which goods or services to examine.

Open Ended

Analyze Graphs Is it more efficient to produce 8 million tons of watermelons and 14 million pairs of shoes or 21 million tons of watermelons and no shoes? Explain your answer.

Drawing a Production Possibilities Curve

The production possibilities frontier, shows combinations of production . Any spot on that line represents a point at which all of its resources are being used to the maximum combination of two products.

Multiple Choice

Identify Central Ideas Drawing a production possibilities curve helps a country’s economists determine

• which goods the country can produce.

• which resources should be used to produce goods. should have.

• how the production of one good affects the production of another.

• how many factories and how much farmland the country

Changing Production Possibilities

Production possibilities curves give useful information. They can show how efficient an economy is, whether an economy is growing, and the opportunity cost of producing more of one good or service.

Efficiency

A production possibilities frontier represents an economy working at its most efficient level. Efficiency is the use of resources in such a way as to maximize the output of goods and services. 

underutilization

Any point inside the production possibilities frontier indicates underutilization, or the use of fewer resources than the economy is capable of using. At point b Capeland is growing 5 million tons of watermelons and making 8 million pairs of shoes. This is inefficient because it is less than the maximum possible production.

Growth

A production possibilities curve is a snapshot. It reflects current production possibilities as if a country’s resources were frozen in time. In the real world, however, available resources are constantly changing. If the quantity or quality of land, labor, or capital changes, then the curve will move. 

Technology and Training

When economists collect data to create production possibilities curves, they must first determine which goods and services a country can produce with its current resources. A country’s resources include its land and natural resources, its workforce, and its physical and human capital.

Multiple Choice

The points ON a production possibilities frontier all represent

• the efficient use of resources.

• the cost of using resources.

• underutilization of resources.

• different types of resources.

Multiple Choice

Movement down the PPF curve indicates that the opportunity cost of more capital goods is producing more consumer goods

• True
• False

Multiple Choice

The opportunity cost of increasing production from 4 to 7 boats is

• 1 boat
• 2 boats
• 2 trucks
• 3 trucks

Multiple Choice

The opportunity cost of increasing production from 7 to 9 trucks is

• Scarcity
• 2 boats
• 2 trucks
• 3 boats

Multiple Choice

What is opportunity cost?

• a graph that shows how much an economy can produce between 2 goods
• how much money something is
• the opportunity one has to give up in order to gain something else
• land, labor, capital, entrepreneurs

Multiple Choice

The table shows the production possibilities for a country. Based on the table, which of the following production combinations is a possibility?

• 28 pizzas and 5 pairs of shoes

• 3 pairs of shoes and 23 pizzas

• 2 pairs of shoes and 20 pizzas

• 4 pairs of shoes and 15 pizzas