II The Production Possibilities Frontier

1
II The Production Possibilities FrontierThe
line that shows the different levels of
production at each stage or after each decision

• A. EfficiencyProduction that maintains or
  follows the line drawn as the Production
  Possibilities Frontier.
• B. Underutilizationany production that falls
  under or within the line identified as the
  Production Possibilities Frontier.
• C. GrowthDue to a change in labor or resources,
  production exceeds the Production Possibilities
  Frontier. This is a temporary situation as the
  Production Possibilities Frontier is redrawn.

2
III. DEFINING COST

• TO ECONOMISTS IT ALSO MEANS WHAT HAS TO BE GIVEN
  UP ALONG WITH CHANGING FINANCIAL COSTS.
• . The Law of Increasing CostsWhen there is a
  change or increase in production of one product
  from another there will be an increase in the
  opportunity costs as production shifts. This
  increase may be temporary and explains why the
  Production Possibilities Frontier will curve.

3
IV. Basic Economic Ideals

• T.I.N.S.T.A.A.F.L.--(THERE IS NO SUCH THING AS A
  FREE LUNCH)
• States that all things have value and that
  value has to be assumed by someone.
• When you consume food you are using value.

4
Basic Economic Ideals

• CYCLE OF A DOLLAR
• Belief that is an active and healthy
  economy--every dollar spent theoretically will
  cycle thru the economy and return to you

5
Basic Economic Ideals

• RULE OF 72
• An investment rule to explain compound interest
• Take the percent of return on your investment
  (2) and divide that into the number 72. (36)
• That will tell you the number of years before a
  one time investment will double.
• http//www.youtube.com/watch?v2P5JlvLuJeA

6
Basic Economic Ideals

• Need for Economic Diversity
• In order for the economy to grow, there must be
  people of different economic status.
• The people are motivated to produce and work in
  order to improve their economic status!
• if everyone was wealthy concept