ecogov: 1.3 production possibilities curve
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START PREP
1.3 PRODUCTION POSSIBILITIES CURVE
TEXTBOOK PAGE 13
THEN START READING SECTION
NOTES BEGIN AT 13.35
ECONOMICSMR. HOOD27 JANUARY 2014
1.3 PRODUCTION POSSIBILITIES CURVE
ECONOMICSMR. HOOD`S NOTES27 JANUARY 2014
SECTION FOCUSDECISIONS ABOUT WHICH GOODS AND SERVICES TO PRODUCE EFFECT EACH OF US EVERY DAY. PRODUCTION POSSIBILITIES GRAPHS CAN HELP US TO EXAMINE THE OPPORTUNITY COST OF THESE DECISIONS.
INTRODUCTION
IN 1941 USA ENTERED WORLD
WAR II
U.S. FACED A DECISION
CREATE WEAPONS +
EQUIPMENT OR FACE DEFEAT
SO GOVERNMENT SWITCHED ALL
OUTPUT TO MILITARY PRODUCTS
EVERYTHING ELSE WAS PUT ON
HOLD
GUNS OR BUTTER
IN EASY WORDS, NATIONS MUST
ALWAYS CHOOSE WHAT TO PRODUCE
WHETHER AT WAR OR NOT
OBJECTIVE 1INTERPRET A PRODUCTION
POSSIBILITIES CURVE
ECONOMISTS USE PRODUCTION
POSSIBILITIES GRAPHS
TO ANALYZE CHOICES
AND TRADE-OFFS
HELPS US SEE HOW ONE
THING RELATES TO ANOTHER
SHOWS ALTERNATIVE WAYS TO USE
RESOURCES
OBJECTIVE 2DEMONSTRATE HOW
PRODUCTION POSSIBILITIES CURVES SHOW EFFICIENCY,
GROWTH AND COST
GRAPHS SHOW HOW EFFICIENT AN
ECONOMY IS
WHETHER IT HAS
GROWN OR SHRUNK
AND THE OPPORTUNITY COST
PRODUCTION POSSIBILITIES CURVE
0%
1 - EFFICIENCY
IS PRODUCTION AT ITS BEST?
ANY POINT UNDER THE LINE IS
UNDERUTILIZATION
0%
2 - GROWTHFUTURE PRODUCTION
POSSIBILITIES FRONTIER
MORE WORKERS OR BETTER TECHNOLOGY
0%
LAW OF INCREASING COSTS
MORE MONEY NEEDED TO
MAKE GUNS OR BUTTER
0%
OBJECTIVE 3UNDERSTAND THAT A
COUNTRY`S PRODUCTION POSSIBILTIES DEPEND ON
ITS AVAILABLE RESOURCES AND TECHNOLOGY
GOVERNMENTS MUST DECIDE WHAT TO
PRODUCE
DEPENDING ON LAND AND NATURAL
RESOURCES
PHYSICAL AND HUMAN
CAPITAL
TECHNOLOGY
THIS INFORMATION EFFECTS A COUNTRIES
PRODUCTION