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LT 4

I can read and interpret a production possibility graph (PPF model)

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Measuring Scarcity and Choice

  • Production Possibilities Frontier (PPF) =
    • Graph that shows how an economy might use its given resources to produce two goods
    • More of one good ⇒ less of another

Learning Target Pg. 2

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Production Possibilities � Table

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Production Possibilities � Frontier (PPF)

Soybeans

Wheat

60

65

52

38

30

20

10

0

10

20

30

40

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Analyzing PPf’s & Opportunity cost

Soybeans

Wheat

E

D

C

B

A

60

65

52

38

30

20

10

0

10

20

30

40

Moving from A to B

Gain: 38 Bushels of Wheat

Lose: 10 Bushels of Soybeans

Moving from D to E

Gain: 5 Bushels of Wheat

Lose: 10 Bushels of Soybeans

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PPF with No Specialized � Resources (Constant O.C.)

D

C

B

A

Brown Shoes

Black Shoes

50

40

30

20

10

0

50

40

30

20

10

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The Concept of Efficiency

  • Economic Efficiency = Result of using resources in a way that produces the maximum amount of goods & services. Any point on the PPF.
  • All available resources are utilized.

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Learning Target Pg. 2

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PPF

Points A, B, and C are efficient.

Points D and E are inefficient.

Points F and G are unattainable.

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How can you reach the unattainable?

-technology increases

-trade

-get more resources