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Production Possibilities Curve

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by

michelle ashmore

on 23 August 2016

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Transcript of Production Possibilities Curve

Production Possibilities Curve
HOW DO WE READ IT??
when you move along the curve, what is happening?
from point A to point B...
When we shift to a new curve...
I - Increase
R- Right

D- Decrease
L- Left
Underutilization
when a nation is not using resources wisely the production falls inside the PPC
for example
if someone finds a bug inside the flour, then the nation has to stop using flour.

Now they can't make as many waffles and pancakes as they want to (at a point of efficiency)

SO... the nation makes less and the productivity point is inside the PPC line = underutilization
a graph that shows the different ways a nation can use resources to make a good.
how opportunity costs are graphed -- make more of one, you have to make less of another
Goods/Services
the items being compared
ex: pancakes and waffles
Point of Efficiency
point in PPC that shows the wise use of resources to make the most goods possible
ex: B, D
efficiency: wise use of resources

productivity: how quickly you make goods. increase productivity with specialization
Underutilization
not using resources wisely, making less goods
ex: G
Growth
what can happen if we increase productivity
2 things cause growth:

TECHNOLOGY

RESOURCES
Future PPC
new PPC if growth happens

only possible through efficient use of resources and new technology
Impossible
because of scarcity (limited resources) it is not possible to grow to this point
ex: H
in order to make more TV, we have to make less radio
now lets try it with pancakes and waffles......
what about moving from point C to point D?
remember only Technology and Resources can cause growth...
IRDL the TURTLE!!!
looking at waffles and pancakes
A = 0 TV, 85 radio
B = 25 TV, 70 radio
9
8
7
6
5
4
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2
1
1 2 3 4 5 6 7 8 9 10 11
waffles (millions)
pancakes (millions
Full transcript