1-11-10 Stop thinking in terms of limitations and start

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1-11-10

• Stop thinking in terms of limitations and start
  thinking in terms of possibilities
• Terry Josephson
• What would you like to accomplish this year?

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Why do graphs show information more clearly than
texts or tables?
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(No Transcript)
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(No Transcript)
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Production Possibilities

• Economists use graphs to analyze the choices and
  trade offs people make.
• Production Possibilities curve shows alternative
  ways to use the economys productive resources.
• Lets looks at some Possibilities

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Step 1
Graph A
Graph B
Shoes (millions of pairs)
Shoes (millions of pairs)
25
25
no watermelons, all possible shoes
20
20
15
15
a (0,15)
10
10
no shoes, all possible watermelons
5
5
f (21,0)
0 5 10 15 20 25
0 5 10 15 20 25
Watermelons (millions of tons)
Watermelons (millions of tons)
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Step 2
Plot and label the points. This is the production
possibilities curve.
Shoes (millions of pairs)
25
20
15
10
5
0 5 10 15 20 25
Watermelons (millions of tons)
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Step 3
The curve will move to the right if more land,
labor or capital resources become available.
Shoes (millions of pairs)
25
20
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Each time a shift in production takes place, cost
occurs. What is the cost in shoes when we move
from 20 to 21 million tons of watermelon?
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5
0 5 10 15 20 25
Watermelons (millions of tons)
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Your Turn to Graph
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Law of Increasing Costs

• Shifting the factors of production to produce a
  different item requires increasingly more
  resources to produce more of the new item,
  therefore opportunity costs increase.
• This explains why the line curves

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Chapter 1, Section 3 Quiz
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Match the Term with its definition

• Underutilization
• Efficiency
• Law of Increasing Costs

• Shifting the factors of production to produce a
  different item requires increasingly more
  resources to produce more of the new item
• an economy that is not using all its resources
• an economy that is using all of its resources to
  produce the maximum output of goods and services

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4. A production possibilities curve shows the
relationship between the production of

• Farm goods and factory goods.
• Two types of farm goods.
• Two types of factory goods.
• Any two categories of goods.

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• 5. The line on a production possibilities curve
  showing the relative amounts of two types of
  goods processed using all resources is called the
• production possibilities frontier.
• opportunity cost line.
• utilization of resources.
• maximum possible production line.

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• 6. Increasing the number of laborers in an
  economy generally causes a(n)
• increase in the production possibilities curve.
• decrease in the production possibilities curve.
• increase in the opportunity cost of production.
• decrease in the opportunity cost of production.

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• 7. The law of increasing costs means that as
  production shifts from one item to another,
• the cost of production gets cheaper and cheaper.
• the cost of producing an item stays the same no
  matter how many are produced.
• more and more resources are necessary to increase
  production of the second item.
• the land costs of increasing production rise much
  more steeply than do the labor costs.

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• 8. An economy that is NOT using all of its
  resources to gain the maximum possible production
  is

c. growing d. trading off

• efficient
• underutilized

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• 9. The curve usually seen in a production
  possibilities frontier can be explained by
• growth in the economy.
• underutilization of resources.
• increasing an economys efficiency.
• the law of increasing costs.

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10. An economy that is producing the maximum
amount of goods and services is considered

• efficient
• underutilized

• c. growing
• d. trading off

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Match the Term with its definition

• Underutilization
• Efficiency
• Law of Increasing Costs

• Shifting the factors of production to produce a
  different item requires increasingly more
  resources to produce more of the new item
• an economy that is not using all its resources
• an economy that is using all of its resources to
  produce the maximum output of goods and services

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4. A production possibilities curve shows the
relationship between the production of

• Farm goods and factory goods.
• Two types of farm goods.
• Two types of factory goods.
• Any two categories of goods.

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• 5. The line on a production possibilities curve
  showing the relative amounts of two types of
  goods processed using all resources is called the
• production possibilities frontier.
• opportunity cost line.
• utilization of resources.
• maximum possible production line.

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• 6. Increasing the number of laborers in an
  economy generally causes a(n)
• increase in the production possibilities curve.
• decrease in the production possibilities curve.
• increase in the opportunity cost of production.
• decrease in the opportunity cost of production.

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• 7. The law of increasing costs means that as
  production shifts from one item to another,
• the cost of production gets cheaper and cheaper.
• the cost of producing an item stays the same no
  matter how many are produced.
• more and more resources are necessary to increase
  production of the second item.
• the land costs of increasing production rise much
  more steeply than do the labor costs.

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• 8. An economy that is NOT using all of its
  resources to gain the maximum possible production
  is

c. growing d. trading off

• efficient
• underutilized

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• 9. The curve usually seen in a production
  possibilities frontier can be explained by
• growth in the economy.
• underutilization of resources.
• increasing an economys efficiency.
• the law of increasing costs.

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10. An economy that is producing the maximum
amount of goods and services is considered

• efficient
• underutilized

• c. growing
• d. trading off