z Production Possibilities Curve z Section 2 Production

z Production Possibilities Curve

z Section 2 Production Possibilities Curve

Production Possibilities Curve z § Production Possibilities Curve: Graph showing options for allocating resources between production of two different goods or services § Curve shows efficient production (all resources being used efficiently) § Example: § Bakery owner has what resources? § Labor: § Capital: § Natural:

z § Can make: § Cranberry Orange muffins § Or § Almond Croissants Options

Production Possibilities Table z Cranberry Orange Muffins Almond Croissant 0 10 1 8 2 6 3 4 4 2 5 0 What happens as more croissants are produced? What happens as more muffins are produced? What is the opportunity cost of producing 1 muffin? What is the opportunity cost of producing 1 croissant?

z Cranberry Orange Muffin Graphing 5 4 3 2 1 0 2 4 6 8 10 Almond Croissant

z Cranberry Orange Muffin Graphing 5 4 3 2 1 0 2 4 6 8 10 Almond Croissant

z Increasing PPC § Increasing PPC shows that as more of one good is produced, the more must be given up of the other good § Meaning the opportunity cost is increasing

Shifting PPC z § PPC can move outward (economic growth) or inward (economic decline) § Technology moves the curve outward

Shifting PPC z § War, natural disasters move curve inward § Inefficiency: producing less than capable of (below the curve)