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AP Economics

AP Economics. Mr. Bernstein Module 3: The Production Possibilities Curve September 13, 2013. AP Economics Mr. Bernstein. The Production Possibilities Curve Model A very simple model can explain a lot Highlights the importance of trade-offs in economic analysis

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AP Economics

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  1. AP Economics Mr. Bernstein Module 3: The Production Possibilities Curve September 13, 2013

  2. AP EconomicsMr. Bernstein The Production Possibilities Curve Model • A very simple model can explain a lot • Highlights the importance of trade-offs in economic analysis • Helps us understand efficiency, opportunity cost, and economic growth • There are two sources of economic growth - increases in the availability of resources and improvements in technology

  3. AP EconomicsMr. Bernstein The Production Possibilities Curve

  4. AP EconomicsMr. Bernstein The Production Possibilities Curve • Simplifying Assumptions • Resources and Technology are Fixed at a point in time • Economy produces only two goods • Off the curve is Not Feasible or Feasible but inefficient • On the curve is feasible and efficient

  5. AP EconomicsMr. Bernstein The Production Possibilities Curve • A linear PPC means Opportunity Costs are constant • Example: Pizzas vs Bulldozers. At every level of production, the tradeoff in # of pizzas per bulldozer is the same • But not all pizzas and not all bulldozers are created at the same cost. Why?

  6. AP EconomicsMr. Bernstein The Production Possibilities Curve • Concave due to “Law of increasing opportunity costs”

  7. AP EconomicsMr. Bernstein Economic Growth • Expansion of an economy’s production possibilities

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