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Production Possibilities Curve. Imagine…. that we decided to do a fundraiser. We found 10 metal sheets in the back of the school, and we decided to use them to make goods to sell. We only know how to make cookie sheets and pie pans.
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Imagine… that we decided to do a fundraiser. We found 10 metal sheets in the back of the school, and we decided to use them to make goods to sell. We only know how to make cookie sheets and pie pans. One metal sheet can make 4 cookie sheets or 8 pie pans, or a combination of both. What would we make? How would we make this decision? OR
Production Possibilities Curve • A graph that shows alternative ways to use an economy’s productive resources • Used to analyze the choices and trade-offs that people make • A production possibilities frontier is the line on the PPC that shows the maximum possible output an economy can produce
What is the significance of: A B C D E
Economic Growth • Economic growth implies an outward shift in an economy’s production possibilities curve • When we draw a PPC, we assume that the quantity and quality of the economy’s factors of production and its technology are unchanged • Changing these will shift the curve. Anything that increases the quantity or quality of the factors of production available to the economy or that improves the technology available to the economy contributes to economic growth
