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Welcome!

What one thing do you do best? What makes you good at it?

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Production Possibilities for snaptext Corp.

	# of Snaps	# of Texts
Round 1
Round 2
Round 3
Round 4
Round 5

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Graph your results

Snaps

Texts

15

65

7

0

32

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Typical PPF Curve

Beyond the Curve:

Producing more than “maximum” capacity,

(Not sustainable)

Inside the Curve:

Producing less than “Maximum” capacity

Production Possibilities Frontier (PPF) represents the varying amounts that two products can be produced with one set of resources

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Watch the following clips. Decide if it demonstrates a firm operating beyond, on or inside their Production Possibilities Frontier.

OR

ECONOMICS

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Drag the finger to show whether this clip shows a company working inside or outside of their production possibilities frontier

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Drag the finger to show whether this clip shows a company working inside or outside of their production possibilities frontier

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Drag the finger to show whether this clip shows a company working inside or outside of their production possibilities frontier

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Drag the finger to show whether this clip shows a company working inside or outside of their production possibilities frontier

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Drag the finger to show whether this clip shows a company working inside or outside of their production possibilities frontier

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Practice #1

______Production Alternative______ Types of Production A B C D E
Butter	0	10	12	14	16
Guns	50	40	30	20	0

Draw a production possibilities curve for butter and guns using the data above.
Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C).

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What is the opportunity cost of moving from point A to point B?

What is the opportunity cost of moving from point D to point E?

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Practice #2

______Production Alternative______ Types of Production A B C D E
Robots	0	250	450	650	850
Wheat	130	117	109	89	0

Draw a production possibilities curve for robots and wheat using the data above.
Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C).

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What is the opportunity cost of moving from point B to point C?

What is the opportunity cost of moving from point D to point E?

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Practice #3

______Production Alternative______ Types of Production A B C D E
Tanks	0	10	20	30	40
Bread	75	68	54	47	0

Draw a production possibilities curve for tanks and bread using the data above.
Label the points where the economy would be efficient (A), underutilized (B) and unattainable (C).
What is the opportunity cost of moving from point A to point B?
What is the opportunity cost of moving from point B to point C?

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What is the opportunity cost of moving from point A to point B?

What is the opportunity cost of moving from point C to point D?

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PRODUCTION POSSIBILITIES FRONTIER

Economists use models to…

Observe and predict human behavior.

Communicate economic principles.

Economic model: a simple depiction of a complex idea

Sometimes students will find the simplifications inherent in an economic model to be frustrating. Remind them that the simplification offered by a model is a feature, not a bug. It might help to provide students with an example. A map is a model of the landscape. A map is useful precisely because it strips away details (individual trees, power poles, and other minor natural and physical features) that are not essential to the map user’s ultimate goal (getting from one place to another).

When trying to answer a research question or communicate an economic principle, an economist will choose the model that is most suited to the task. Someone trying to teach another person about airplanes, for example, would use an airplane figurine to illustrate an airplane’s appearance, but they would use a paper airplane to demonstrate the function of an airplane.

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PRODUCTION POSSIBILITIES FRONTIER

Economists can hold all variables in a model constant, except one, to test cause and effect statements like…

Ceteris paribus, if A, then B

Ceteris paribus: (Latin) all other things being equal

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Production possibilities frontier (PPF): a graphic representation of output combinations that can be produced given an economy's available resources and technology

PRODUCTION POSSIBILITIES FRONTIER

Quantity of Tiger Bookmarks

Quantity of Panda Bookmarks

Class Production Possibilities

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PRODUCTION POSSIBILITIES FRONTIER

Quantity of Tiger Bookmarks

Quantity of Panda Bookmarks

Class Production Possibilities

In order for graphical models to effectively communicate information, a title and axis labels are essential!

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Quantity of Tiger Bookmarks

Quantity of Panda Bookmarks

Class Production Possibilities

L

J

K

J - Possible and efficient; all resources are fully employed

K - Possible, but inefficient

L - Not currently possible given available resources and technology

Point J - and any other point on the PPF - represents an output of tiger and panda bookmarks that was possible given the resources available. It is also efficient in that resources have been fully employed. Use data from your class simulation to highlight a point on the PPF the class has graphed (perhaps Possibility C). Note that any point on the frontier - even those without an assigned point and label - represent combinations of the two outputs that are possible for the producer to produce given the available resources and technology.

Point K - or any other point to the left of the PPF - represents an output of tiger and panda bookmarks that is possible to produce given the resources available. However, any point to the left indicates the resources were not used to their full potential. In the case of our simulation, the class could have had an outcome like Point K if some students accidentally damaged their bookmark template or if some student workers wanted to make a bookmark, but got distracted and failed to finish the task or just felt too tired or ill to complete the task.

Point L - or any other point to the right of the PPF - represents an output of tiger and panda bookmarks that was not possible given the available resources and technology. However, if additional resources or better quality resources became available (more bookmark templates, for example) producing at Point L might be possible in the future.

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PRODUCTION POSSIBILITIES FRONTIER

Quantity of Tiger Bookmarks

Quantity of Panda Bookmarks

Class Production Possibilities

Our society is capable of producing at point M.

Our society should produce at point N.

Positive statement

Normative statement

M

N

Claims Based on the Model

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PRODUCTION POSSIBILITIES FRONTIER

Quantity of Tiger Bookmarks

Quantity of Panda Bookmarks

Class Production Possibilities

How is scarcity evident in the PPF?

How is opportunity cost evident in the PPF?

Suggested Student Responses (answers may vary)

Scarcity - The fact that the model shows a limit to what a society is capable of producing illustrates scarcity. If societies had access to infinite resources and technology, then their production possibilities would be infinite - not bounded by a frontier.
Opportunity cost - Each time a tiger bookmark was produced, it meant giving up the option to produce a panda bookmark. Similarly, each time a panda bookmark was produced, it meant giving up the option to produce a tiger bookmark. In the case of the class simulation, there was a one-to-one tradeoff in the production of panda and tiger bookmarks. While no society only produces two goods or services, they do in fact face an opportunity cost each time they decide to allocate scarce resources to producing a particular good or service. For example, when a society chooses to produce more military goods and services, it means forgoing the opportunity to use those resources to produce goods and services for civilian consumption.

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If the U.S. chooses to produce 16 million smartphones, what is the maximum number of tablets it can produce?

What does the U.S. gain by choosing to move from Point A to Point B? What does it give up?

Make one positive statement based on the model.

Let’s Practice

PRODUCTION POSSIBILITIES FRONTIER

C

B

A

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PRODUCTION POSSIBILITIES FRONTIER

C

B

A

Debrief

If the U.S. chooses to produce 16 million smartphones, what is the maximum number of tablets it can produce?

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PRODUCTION POSSIBILITIES FRONTIER

C

B

A

Debrief

If the U.S. chooses to produce 16 million smartphones, what is the maximum number of tablets it can produce?

0 tablets

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PRODUCTION POSSIBILITIES FRONTIER

C

B

A

Debrief

What does the U.S. gain by choosing to move from Point A to Point B? What does it give up?

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PRODUCTION POSSIBILITIES FRONTIER

C

B

A

Debrief

What does the U.S. gain by choosing to move from Point A to Point B? What does it give up?

It gains 8 million smartphones

It gives up 4 million tablets

Gain

Opportunity Cost

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PRODUCTION POSSIBILITIES FRONTIER

C

B

A

Debrief

Make one positive statement based on the model.

Remember, positive statements must be testable.

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eXIT tICKET 2.1 PRODUCTION POSSIBILITIES

How is the idea of Production Possibilities connected to opportunity cost?

How could you shift your own personal production possibilities Frontier outward to be more productive?

How does the idea of production possibilities help us understand why the government doesn’t provide more funding for education and healthcare?

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eXIT tICKET 2.1 PRODUCTION POSSIBILITIES

How is the idea of Production Possibilities connected to opportunity cost?

How could you shift your own personal production possibilities Frontier outward to be more productive?

How does the idea of production possibilities help us understand why the government doesn’t provide more funding for education and healthcare?