Production Possibilities Graphs In this lesson we will
Production Possibilities Graphs • In this lesson, we will examine the various options available to producers. • Students will be able to define the following terms: Production Possibilities Graph Efficiency Underutilization Production Possibilities Frontier BAUMAN 2019
Producers have options. Should a farmer grow corn or broccoli? BAUMAN 2019
A Production Possibilities Graph • Shows alternative ways of using resources. • If a farmer uses more of his land to grow corn, he has less land for broccoli. • Every decision has its cost. BAUMAN 2019
What is the cost of producing more automobiles? BAUMAN 2019
Efficiency • Using resources in such a way as to maximize production. • Why is it important to be efficient? BAUMAN 2019
Look at the graph. Where is efficiency occurring? BAUMAN 2019
Look at this graph. Where is efficiency occurring? BAUMAN 2019
Underutilization • Opposite of efficiency. • Occurs when an economy uses fewer resources than it is capable of using. • Why do producers avoid the underutilization of resources? BAUMAN 2019
Look at the graph. Where is underutilization occurring? BAUMAN 2019
The Production Possibilities Frontier • The line on the graph that shows the maximum possible production. • At the frontier, efficiency is occurring. • New technology can shift the frontier. BAUMAN 2019
Look at the graph. Where is the production possibilities frontier? BAUMAN 2019
Don’t Forget Scarcity! • A producer cannot produce everything. • A producer must make choices. • Remember: It’s all about scarcity. Our resources are limited but our wants and desires are unlimited. BAUMAN 2019
Questions for Reflection: 1. What does a production possibilities graph show? 2. Define efficiency. 3. Why is it important to be efficient? 4. Define underutilization. 5. What problems are created by underutilization? 6. What is the production possibilities frontier? E. Napp
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