production possibilities curves - pbworks

ProductionPossibilities Curves

Objectives You may wish to callstudents’ attention to the objectivesin the Section Preview. The objec-tives are reflected in the main head-ings of the section.

Bellringer Ask volunteers toexplain why graphs sometimes showinformation more clearly than textor tables. Explain that in this sectionthey will learn about an importantcategory of graphs in economics:production possibilities curves.

Vocabulary Builder Have studentswork in pairs to find the definitionfor each key term listed in theSection Preview. One member ofeach pair should then explain theterm’s meaning to the other. Studentsshould switch roles for each term.

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Opportunity Costs To build understanding of theconcept of opportunity costs and trade-offs, havestudents use a web graphic organizer like the oneat the right to explain what a production possi-bilities graph can show. Tell students that a webshows a main idea and its supporting details.

Section Reading Support Transparencies A tem-plate and the answers for this graphic organizercan be found in Chapter 1, Section 3 of the SectionReading Support Transparency System.

Graphing the Main IdeaB U I L D I NGB U I L D I NG

K E Y CONCE PTSK E Y CONCE PTS

ChaptChapter er 11 •• SectionSection 33

Guided Reading and ReviewUnit 1 folder, p. 6 asks students toidentify the main ideas of the sectionand to define or identify key terms.

AA s the United States entered World War IIin 1941, it faced an urgent task: create

the weapons and equipment needed to winthe war or face defeat. Government agenciestook the lead in switching the output ofAmerica’s factories, farms, and mines fromthe production of consumer products to theproduction of military products.

Whether at war or not, nations mustchoose what to produce. In 2002, farmersin the United States grew about 2 milliontons of watermelons. Could they haveproduced more? If they had, what wouldhave been the opportunity cost?

Production PossibilitiesEconomists often use graphs to analyze thechoices and trade-offs that people make.Why? Because graphs help us see how onevalue relates to another value. A productionpossibilities curve, or graph, shows alterna-tive ways to use an economy’s productiveresources. The axes of the graph can showcategories of goods and services, such as farmgoods and factory goods or capital goods andconsumer goods. The axes can also displayany pair of specific goods or services, suchas hats on one axis and shoes on the other.

production possibilitiescurve a graph thatshows alternative waysto use an economy’sresources

ProductionPossibilities Curves

Preview ObjectivesAfter studying this section you will be able to:1. Interpret a production possibilities curve.2. Demonstrate how production possibilities

curves show efficiency, growth, and cost.3. Understand that a country’s production

possibilities depend on its availableresources and technology.

� During World War II, consumergoods were in shortsupply as the nationshifted resources toincrease productionof planes, ships,artillery, and ammu-nition. Rationcoupons (far left)were used to ensurethat civilians got afair share ofconsumer goods.

Section FocusDecisions about which goods andservices to produce affect each of usevery day. Production possibilitiesgraphs can help us examine theopportunity cost of these decisions.

Key Termsproduction

possibilities curveproduction

possibilities frontierefficiencyunderutilizationcostlaw of increasing costs

Lesson PlanTeaching the Main Concepts

1. Focus Explain that this section con-tinues the discussion of opportunitycost and trade-offs by describing toolsthat economists use to analyze theseconcepts.2. Instruct Work closely with the textvisuals to help students understand thekey concepts. Demonstrate how graphscan show efficiency, growth, and cost.Discuss both the historical and the busi-ness examples. Be sure that studentsunderstand that graphs are an excellentway of showing how one element of aneconomy affects others.3. Close/Reteach Remind students thatgraphic tools are used to assess theglobal economy as well as theeconomies of countries. Have studentsexamine the tables and graphs in analmanac. Ask them to describe whatsome of the visuals show.

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ChaptChapter er 11 •• Section Section 33

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Scarcity One of the key concepts in this sectionis that production possibilities curves are a usefulway for economic planners to make the mostproductive use of scarce resources. A productionpossibilities frontier illustrates scarcity. It showsthe limits for an economy at a particular point intime, given the existing resources and level oftechnology. If resources are gained or technologyimproves, however, a new frontier is created andthe graph “shifts to the right.”

Ask students to imagine a very simple productionpossibilities graph illustrating some aspect of theirlives. Then ask them to think of a way to addresources or improve technology to “shift” thisgraph “to the right.” Have students share theirexamples with the class.

Econ 101: Key Concepts Made EasyEcon 101: Key Concepts Made Easy$Answer to . . .Cartoon Caption Economists usegraphs to show complicated dataand the relationships between datain a format that is easy to grasp.They also use graphs to illustratetrends.

Building Key Concepts The oppor-tunity cost is the ability to producewatermelons.

BackgroundInterdisciplinaryInterdisciplinaryVisual images are a powerful way toconvince groups of people that acourse of action is desirable. Duringboth World War I and World War II,the United States government usedposter art to gain support for the warand for the economic policies that theleaders felt would win the war.Posters urging people to buy LibertyBonds during World War I exhortedthem to “Beat Back the Hun.”Persuasive posters during World WarII showed strong and confidentwomen working in factories. Otherposters, designed to help peopleeconomize and save scarceresources for the troops, used sloganssuch as “Food is Ammunition—Don’tWaste It” to get their points across.

Have students research the changes inproduction that occurred in the UnitedStates during World War II (for exam-ple, changing from producing automo-biles to making military vehicles). Askthem to share their research with theclass. Hold a discussion in class aboutwhat industries might change, andhow they would change, during a wartoday. GT

Drawing a Production Possibilities Curve To draw a production possibilities curve,an economist begins by deciding whichgoods or services to examine; for example,farm goods and factory goods. In thisexample shoes and watermelons becomethe values shown on the two axes of thegraph. If the vertical axis in Graphs A andB in Figure 1.4 represents shoes, Graph Aindicates that this fictional country,

Capeland, could produce 15 million pairsof shoes if it used all of its resources toproduce only shoes.

The horizontal axis represents water-melons. Graph B indicates that Capelandcould produce 21 million tons of water-melons if that’s the only product it chose toproduce. So Capeland can produce amaximum of:

15 million pairs of shoes OR

21 million tons of watermelons

A third, more likely, alternative appearsin Figure 1.5. The citizens of Capelandcould also produce both shoes and water-melons, and this range of choices appears inthe table and graph in that figure. It showssix different ways that Capelanders coulduse their resources to produce watermelonsand shoes. Using the made-up data from thetable, we can plot points on the graph andthen connect them to draw the line shownin Figure 1.5. This line that we can draw,called the production possibilities frontier,shows combinations of the production ofboth shoes and watermelons. Any spot on

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Graph A Graph B

No watermelons,all possible shoes

No shoes, all possible watermelons

Shoe

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Shoe

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Figure 1.4 Production Possibilities Curve Step 1Figure 1.4 Production Possibilities Curve Step 1

You can begin to build a production possibilities curve by plotting two of the productionchoices on a grid. Graph A reflects a decision to produce 15 million pairs of shoes. GraphB reflects a decision to produce 21 million tons of watermelons.Opportunity Cost What is the opportunity cost of the decision shown in Graph A?

production possibilitiesfrontier the line on a production possibilitiesgraph that shows themaximum possibleoutput

“We feel he’s either going to be an artist or an economist.”

� Why do economists use graphs?

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Consider these suggestions to take advantage ofextended class time:

� Share with students the Background Note onp. 14. Organize students into groups to researchthe history of government poster art in theUnited States. Ask them to focus their researchon art that has an economic purpose, such as theposters described in the background note. Havestudents share the results of their research in aclass discussion.

� Have students complete the EconomicDetective Activity, p. 10, “Desert Flower,” in theUnit 1 folder. Have each student find and read anarticle on the economy of a community and relatethat to chapter concepts in an oral or writtenreport.

� Use the Simulations and Data Graphing CD-ROM to give students practice with productionpossibilities graphs and other economic graphingtools.

Block Scheduling StrategiesBlock Scheduling Strategies

Have students examine the graph onthis page. Tell them to imagine thatthey are members of the governmentof Capeland. At present Capeland isat Point b on the production possi-bilities frontier. Their job is to con-vince other officials to makedecisions that will move Capeland’sproduction to Point d. Ask each stu-dent to transfer the information fromthe graph and write a short para-graph that gives reasons for themove and uses the graph to showthat the change is possible.

Transparency Resource PackageEconomics Concepts, 1C:

Production Possibilities Graph

Have students work in pairs orgroups of three to create five ques-tions generalizing the informationand content of this section. Suggestthat the answer to each questioninvolve at least one of the key terms.Have groups exchange questions andwrite out answers. ELL


Answer to . . .Building Key Concepts The oppor-tunity cost is the production of 3million pairs of shoes.

that line represents a point at whichCapeland is using all of its resources toproduce a maximum combination of thosetwo products.

Trade-OffsEach point in Figure 1.5 reflects a trade-off.Near the top of the curve (points a and b),shoe factories produce more shoes, butfarms grow fewer watermelons. Movingdown the curve, farms grow more water-melons, but factories make fewer shoes.Why? Because land, labor, and capital arescarce. Using the factors of production tomake one product means that fewerresources are left to make something else.

Efficiency, Growth, and CostProduction possibilities graphs tell usimportant information. They can showhow efficient an economy is, whether aneconomy has grown or shrunk, and theopportunity cost of a decision to producemore of one good or service.

Efficiency A production possibilities frontier repre-sents an economy working at its mostefficient level of production. Efficiencymeans using resources in such a way asto maximize the production or output ofgoods and services. However, sometimeseconomies operate inefficiently. Forexample, what would happen if somefarmers and factory workers were laidoff? The farms and factories where theyworked would produce fewer goods. Thistrade-off is represented by drawing apoint inside the production possibilitiesfrontier.

Any point inside the line indicates an underutilization of resources. Under-utilization means using fewer resourcesthan the economy is capable of using.Point g in Figure 1.6 shows that Capelandis harvesting 5 million tons of water-melons and manufacturing 8 million pairsof shoes—much less than the maximumpossible production.

efficiency usingresources in such away as to maximize theproduction of goodsand services

underutilization usingfewer resources thanan economy is capableof using

Shoes(millions of pairs)

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A productionpossibilities frontier

Shoe

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The table above shows six different combinations of watermelon and shoes thatCapeland could produce using all of its factor resources. Each combination ofnumbers in the table is drawn as a point on the graph. Connecting the points formsa line known as the production possibilities frontier. Opportunity Cost What is the opportunity cost of choosing to produce the combi-nation of goods shown at point c instead of that shown at point d?

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Time: 90 minutes

Activity: Create an economic modelwith a production possibilities curve toanalyze economic data for a fictionalnation.

Grouping: Groups of four to six students.

Purpose: To create data and a produc-tion possibilities curve (similar to thegraph for Capeland on this page) thatshows both production possibilitiesand a possible production possibilitiesfrontier.

Roles: National leader, citizens, economist.

Outcome: Students will understandhow a production possibilities curvecan help in making decisions aboutproduction of goods and services. GT

Economics Assessment RubricEconomics Assessment Rubrics folder,pp. 8–9 provides sample evaluationmaterials for a data graphing assignment.

Simulations and Data Graphing CD-ROM offers data graphing

tools so that students can practice cre-ating and interpreting line graphs.

Have students make a brief outline ofthe material under the heading“Efficiency, Growth, and Cost” (pp. 15–17). Each of the three factorsshould be a major heading withdescriptive information below it. LPR


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Answer to . . .Building Key Concepts The produc-tion possibilities frontier makes a“shift to the right,” meaning thatthe total possible productivity forthat country is greater.

Have students read the section titled “Growth” and then answer the question below.According to the text, which of the following happens to a production possibilities curvewhen economic growth occurs?

A The curve shifts to the left.

B The curve becomes a straight line.

C The curve shifts to the right.

D The curve does not change at all.

Preparing for Standardized TestsPreparing for Standardized Tests��

Growth A production possibilities curve reflects thecountry’s current production possibilities asif the country’s resources were frozen in

time. In the real world,however, the quantity ofresources a country has isconstantly changing. If thequantity or quality of avail-able land, labor, or capitalchanges, then the curve willmove. For example, if immi-grants pour into a country,then more labor becomesavailable. In this way, themaximum amount of goodsthe nation can produceincreases. Likewise, newinventions can allow workersto produce more goods atlower costs. When an

economy grows, economists say that theentire production possibilities curve has“shifted to the right.” Line T in Figure 1.6shows such a shift.

By contrast, when a country’s productioncapacity decreases, the curve shifts to theleft. A decrease could occur, for example,when a country goes to war and loses partof its land as a result. Likewise, if acountry’s population ages, or becomes lesshealthy or less educated, the supply of laborand human capital would decrease, and thecurve would shift to the left.

Cost Speaking economically, note that cost isnot necessarily money. Rather, to an econ-omist, cost is the alternative we give upwhen we choose one option over the other.This statement should sound familiar. Toan economist, cost always means opportu-nity cost. We can use production possibili-ties graphs to see the opportunity costinvolved in a decision.

Looking at the table in Figure 1.5, we cansee that the cost of moving from producingno watermelons to producing 8 million tonsof watermelons is 1 million pairs of shoes. Inother words, we had to sacrifice 1 millionpairs of shoes to produce 8 million tons ofwatermelons. In the same way, if we decideto produce 14 million tons of water-melons—an increase of only 6 milliontons—it costs 2 million pairs of shoes. In thefirst step, those 8 million tons of water-melons cost 1 million pairs of shoes. In thesecond step, an increase of only 6 milliontons of watermelons cost an additional 2 million pairs of shoes. This amounts to 3 million pairs of shoes for 14 million tonsof watermelons.

Everyone would agree that switchingfrom shoes to watermelons costs something.An economist looking at Capeland’seconomy would say that the switch hasincreasing costs. Each time we grow morewatermelons, the sacrifice in terms of shoesincreases. Finally, at the bottom of the table,it costs an additional 5 million pairs of shoesto increase watermelon production by only1 million tons.

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A point of underutilization

Future productionpossibilities frontier

Shoe

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At point g on this graph, not all factorresources are being used, and the outputof farm and factory goods is less thanwhat is possible. Line S represents theeconomy’s current production possibilities.

Line T represents future production possibilities if moreland, labor, or capital resources become available. Investment How does a society benefit when it investsmoney in the development of new technologies?

cost to an economist,the alternative that isgiven up because of adecision

In the News Read more aboutefficiency growth, and cost in “A New Scholarship Strategy,” an article in TheWall Street Journal Classroom Edition.

The Wall Street JournalClassroom Edition

For: Current EventsVisit: PHSchool.comWeb Code: mnc-1013

Typing in theWeb Code when prompted willbring students directly to thearticle.

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Ask students to examine the graphicon this page and then to create a sim-ilar graphic for the opposite situa-tion: Shoe production increases andwatermelon production decreases.Tell them to consider the logical con-sequences of these productionchanges (direct students to the com-ments in the graphic about the addi-tion of less productive land and itsresults).

Transparency Resource PackageEconomics Concepts, 1D:

Production Possibilities GraphOverlay

To help students understand the lawof increasing costs, organize theminto groups of three or four and havethem consider two types of highlytechnological production: missionsinto space and the production ofcomputers. Ask them to analyze andcategorize the information in termsof the types of resources that wouldbe used for each type of production.Then ask them to theorize why theproduction possibilities frontier insuch a situation would curve. Why,for example, would some resourcesthat were well suited to making com-puters be less suitable for space mis-sions? Have each group present itsconclusions as a short written report.GT

Economic Detective ActivityUnit 1 folder, p. 10, “Desert Flower,”provides an integrated application ofchapter concepts.

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Answer to . . . Building Key Concepts The cost isthe decrease in shoe production.

Controversies Over Rain Forests Tropical rainforests are areas of thick vegetation found in equa-torial latitudes around the world. These forestscontain an enormous diversity of plant and animallife. Most rain forest areas, such as the AmazonBasin, are part of developing countries. In manycases these nations hope to exploit the land foreconomic growth. Groups that want to protectand preserve the environment, however, point tothe ecological hazards of clearing this land and

developing it for settlement or for commercialuses, such as mining.

Making the Connection Have students research thearguments on both sides—preservation versusdevelopment—of this question. Tell them to con-sider such economic factors as scarcity, trade-offs,opportunity cost, efficiency, and underutilization.Ask students to present their findings in essay orchart form.

Interdisciplinary Connections: GeographyInterdisciplinary Connections: Geography

Economists explain these increasinglyexpensive trade-offs with the law ofincreasing costs. This law states that asproduction switches from one item toanother (for example, from shoes towatermelons), more and more resourcesare necessary to increase production of thesecond item (watermelons). Therefore, theopportunity cost increases.

Why does the cost increase? In thisexample it is because some resources arebetter suited for use in farming, whileothers are more appropriate for manufac-turing. Moving resources from factory tofarm production means that farmers must

use resources that are not as suitable forfarming. For example, say that at first thiseconomy used its most fertile land forgrowing watermelons. After the best landwas used up, farmers had to use poorerland that could produce less per acre thanthe fertile land could. To increase output onthe poorer land, farmers had to use moreland and other resources.

The law of increasing costs explainswhy production possibilities frontiers,such as the one in Figure 1.5, usuallycurve. As we move along the curve, wetrade off more and more to get less andless additional output.

law of increasing costslaw that states that aswe shift factors ofproduction from makingone good or service toanother, the cost ofproducing the seconditem increases

The law of increasing costs states that as production shifts from one item toanother, in this case from shoes to watermelons, more and more resources arenecessary to increase production of the second item, in this case, watermelons.Opportunity Cost According to this diagram, what is the cost of increasingwatermelon production?

Figure 1.7 The Law of Increasing CostsFigure 1.7 The Law of Increasing Costs

Initially, resources are usedefficiently to make a balanceof watermelons and shoes.

S T E P 1

A decision is made to grow morewatermelons. Less suitableresources are shifted to farm production. Farm productionincreases. Shoe productiondecreases.

A decision is made to grow evenmore watermelons, and moreresources are shifted to farm production. Because the addedland is less productive, a greateramount of it must be cultivated.Farm output increases. Shoeoutput decreases by an evengreater amount.

S T E P 3

S T E P 2

The most suitable land forfarming is used to growwatermelons.

Land with rocky soil andpoor drainage is now usedto grow watermelons.

Land with rocky soil is nowused to grow watermelons.

Shoe factories L3

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Guide to the EssentialsChapter 1, Section 3, p. 4 providessupport for students who need addi-tional review of the section content.Spanish support is available in theSpanish edition of the guide on p. 4.

Quiz Unit 1 folder, p. 7 includesquestions to check students’ under-standing of Section 3 content.

Presentation Pro CD-ROMQuiz provides multiple-choice

questions to check students’ under-standing of Section 3 content.

Answers to . . .

Section 3 AssessmentSection 3 Assessment1. Underutilization is shown by any point

that appears inside the productionpossibilities frontier.

2. A production possibilities curveshows the maximum possible outputalong the production possibilitiesfrontier. If a country’s economic pro-duction is on the frontier, the economyis producing at top efficiency.

3. Opportunity cost can be illustrated bycomparing the data at various pointson the production possibilities frontier.As production of one elementincreases, the curve shows thedecrease in production of the otherelement: the opportunity cost.

4. The production possibilities for farmoutput do not necessarily decrease:The size of each farm has increased,and new technology may also allowmore output per acre.

5. (a) a shift to the right because of theintroduction of new technology thatincreases production (b) a point insidethe graph because of underutilizationof labor (c) a shift to the left becauseof a decline in resources

6. (a) a decline in efficiency and a shift inthe production of goods (b) new tech-nology or other innovations that allowthe entire economy to grow

7. Society A is producing more con-sumer goods than capital goods, investing more in items such as auto-mobiles, compact discs, or clothing.


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Society B is producing more capital goods than con-sumer goods. Society A is probably one where capi-tal goods have already been produced, andtherefore it can produce more consumer goods.Society B may be an emerging nation with a youngeconomy that is seeking to create an industrial base.

Answer to . . .Building Key ConceptsOpportunity costs could includeinfrastructure improvement, orfood.

Resources and TechnologyWhen economists collect data to createproduction possibility curves, they must firstdetermine which goods and services acountry can produce, given its currentresources. A country’s resources include itsland and natural resources, its work force,and its physical and human capital. Bothhuman and physical capital reflect a vitalingredient—technology. At any time, coun-tries have different ways to produce shoes orwatermelons or any of the thousands ofproducts in the world. Each productionmethod uses different technology, or know-how, to create products. So economists alsomust assess each country’s level of technolog-ical know-how: whether Capeland makesshoes and plants watermelons by hand orwhether they have machines to help. Acountry’s production possibilities depend onboth its technological level and the resourcesit has available.

Figure 1.8 Personal Computers per 1,000 PeopleFigure 1.8 Personal Computers per 1,000 People

SwitzerlandUnited States

SwedenAustraliaDenmark

NorwayCanada

GermanyIceland

New ZealandJapan

FrancePoland

HungaryRussia

MexicoBrazilChina

IndonesiaIndia

100 200 300 400 500 600 7000

Source: International Telecommunication Union

800

108.488.783.074.8

11.927.6

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142.0347.1

382.2

451.4484.7487.0

528.3576.8

601.8621.3

413.8

708.7659.8The United States

and WesternEurope are

the heaviestcomputer-using

regions of the world.

Opportunity Cost What opportunity

cost might a poorercountry face if it

chose to purchase or produce more

computers?

Key Terms and Main Ideas1. How is underutilization depicted on a production possi-

bilities frontier? 2. How does a production possibilities curve illustrate how

efficient an economy is? 3. How does a production possibilities curve illustrate

opportunity cost?

Applying Economic Concepts4. Using the Databank Turn to the charts showing the

number of farms and the average size of farms on page535. If the number of farms has decreased since 1950,does this mean that the production possibilities for farmoutput have also decreased? Why or why not?

5. Problem Solving How would you illustrate the impact ofeach of the following events on a production possibilitiescurve for factory goods and farm goods? (a) the computeris invented (b) 1 million farm workers remain unemployedfor six months (c) a drought

6. Critical Thinking Describe a specific event that wouldmake each of the following happen to a production

possibilities curve. (a) a point moves down and to the left(b) the frontier shifts to the right

7. Decision Making Assume that graphs A and B beloweach represent a production trade-off made by a societyfor its economy. Write a brief description of eachsociety. Include specific examples of what the society is producing.

Section 3 Assessment

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Consumer Goods

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PHSchool.com

For: Research ActivityVisit: PHSchool.comWeb Code: mnd-1013

Progress Monitoring OnlineFor: Self-quiz with vocabulary practiceWeb Code: mna-1017

PHSchool.com

Web Code: mng-1012

Typing in the Web Codewhen prompted will bring students directlyto the article.

Progress Monitoring OnlineFor additional assessment, have students accessProgress Monitoring Online at Web Code: mna-1017

production possibilities curves - pbworks

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