PPC

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Wealth
Warm Up:
How do you define
Wealth???
Wealth-How do you define it???
Are these all pictures/illustrations of
wealth???
NOPE!!!!!
WEALTH is resources
and the ability to make
goods and services from
these resources!!!
What do you have that makes
you wealthy right now??
Remember the Economic Problem…
SCARCITY!!
of what????
ECONOMIC
RESOURCES
Types of Resources
REVIEW
Goods v. Services
Good -- An item you can see, feel, and touch
and that requires scarce resources to produce
and satisfies human wants
 Services -- Something that is not physical
that requires scarce resources to produce and
satisfies human wants
=>With your partner list 3 Goods & 3 Services…

Types of Resources – cont.

Natural -- So-called “gifts of nature” used to produce
goods and services; includes renewable and exhaustible
resources
 Renewable – A natural resource that can be drawn
on indefinitely if used conservatively such as the
atmosphere or water supply
 Exhaustible – A natural resource that does not renew
itself and so is available in a finite amount such as oil
or copper ore
 Productive – The inputs, or factors of production,
used to produce the goods and services that people
want
How to achieve economic growth
and become…WEALTHY!!
1.
2.
3.
4.
Increase Resources (if you have more
things, you can produce more goods and
services)
Improve technology (can make things
better and/or faster)
Increase capital goods (use machines
to get the job done faster)
Educate and train the labor force
(employees will become more efficient)
Production Possibilities Curve
(PPC)


It represents the “potential production”
of a combination a consumer good (i.e.
pizza, haircut) and a capital good (i.e.
pizza oven, hair clippers) that can be
produced if all available resources are
present in a given year.
Two Assumptions:
1.
2.
All resources are being used
There is no unemployment
Production Possibilities Curve
(PPC)
Points along the curve represent the
possible combinations of the two goods that
can be produced when the economy’s
resources are used efficiently
 Shows efficient and inefficient combinations
 Shows attainable and unattainable
combinations

Production Possibilities Curve
(PPC)
Movement along the PPC involves giving
up some of one good to get more of the
other – what is this called?
 Movement down the curve indicates that
the opportunity cost of more capital
goods is fewer consumer goods and vice
versa.

PPC
Y
6
6 X
Correctly label and draw the PPC for
the following problem.
 X axis=consumer goods
 Y axis=military goods
 A=attainable area
 B=unattainable area
 C=all military production
 D=all consumer production
 E=greatest opportunity cost in
military goods when both types of
goods are being produced
 F=greatest opportunity cost in
consumer goods when both types
of goods are being produced
 G=equal use of resources
 H=no production
Identify the points-what does each
point represent on this graph???

y
LABEL THE WORDS THAT
DESCRIBE EACH POINT:
b.
Possible
c.
Impossible
Efficient
a.
Inefficient
d.
x
Practicing the PPC!!!
Y
10
Correctly label and draw the PPC for
the following problem.
 X axis=apples
 Y axis=oranges
 A=all apple production only
 B=all orange production only
 C=no production
 D=equal use of resources
 E=attainable area
 F=unattainable area
 G=greatest opportunity cost in
apples when both goods are being
produced
 H=greatest opportunity cost in
oranges when both goods are
being produced
10 X  I=8 apples, 4 oranges
 J=3 apples, 3 oranges
Increased production will shift the PPC to the
right. The more it shifts to the right, the greater
the economic growth.
y
x
Which graph shows more
economic growth??? And why???
Graph A
Graph B
Three Reasons That Prevent Some Countries
From Shifting their PPC to the right:
1.
2.
3.
Inefficient Labor Force (if you are being
unproductive, your economy cannot
grow)
No Loans (you can’t invest in economic
growth in your economy)
Poor Trade Practices (you have nothing
to trade)
Wrap-Up/Review
Below each question/next to each
question, or on a separate sheet of
paper, briefly explain how you know
that is the CORRECT answer!!!

1. What purpose does the production
possibilities curve serve?
a.) it determines whether the economy is
expanding or experiencing a recession
b.) it predicts the possible outcomes of a rise in
unemployment
c.) it proves that while the production of some
goods increases the efficiency of the
economy, the production of others
decreases the efficiency
d.) it shows the possible combinations of goods
that can be produced when available
resources are employed fully and efficiently
2.
What do points outside of the PPC
indicate?
a.) Unattainable combinations of goods
b.) Ideal combination of goods
c.) Inefficient combination of goods
d.) None of the above
3. Economic growth effects the PPC by:
a.) Shifting it inward
b.) Shifting it outward
c.) Causing no change at all
d.) Turning it into a straight line
4. Suppose that during a given period an
economy produces a large amount of
capital goods. What would you expect
to happen to the amount of output
produced during the following period?
a.) Less output would be produced
b.) More output would be produced
c.) Output would not be affected
d.) None of the above
5. Suppose that a new machine that
speeds up automobile production is
introduced into the auto industry.
This would cause the PPC to:
a.) Shift outward
b.) Shift inward
c.) Do nothing
d.) Not enough information is given
6. What do points inside the PPC
indicate?




The combination of goods that employ
resources efficiently
Combinations of goods that employ
resources fully
The combination of goods that do not
employ resources fully
None of the above
7. Which of the following situations might
cause an inward shift in the
production possibilities curve?
a.) A computer network shuts down due to a
virus
b.) More people earn bachelor degrees
c.) A new machine that produces bread faster is
invented
d.) OPEC announces a new source of oil
8. An increase in the labor force would
cause the PPC to:
a.) Shift inward
b.) Shift outward
c.) Do nothing
d.) Turn into a straight line
9. In deciding to go to college, which of
these may involve an opportunity
cost?
a.) Value of goods and services that could be
purchased with money spent on books
b.) Value of goods and services that may be
purchased with tuition money
c.) Value of goods and services that may be
purchased with money spent on boarding
d.) All of the above
10. If you must stay at home and study
for an upcoming economics test, the
opportunity cost of studying would
most likely be highest at which of the
following times?
a.) Monday evening
b.) Wednesday morning
c.) Thursday afternoon
d.) Friday evening
11. Which of the following statements is
true of opportunity costs?
a.) It is the value of all alternatives you pass up
when making a choice
b.) It is the value of the best alternative you give
up when you make a choice
c.) It can only be measured in dollar amounts
d.) It is the same for all individuals
12. Economists assume that which of the
following leads the average person to
choose the most valued alternative
among a number of possibilities?
a.) Rational self-interest
b.) Scarcity
c.) Opportunity cost
d.) None of the above
13. Which of the following would lead to a
sunk cost?
a.) Buying a new CD at an outlet store
b.) Putting a non-refundable deposit at one
college and then attending another
c.) Deciding to study on a Friday night instead
of going to a party
d.) None of the above
14. Which of the following describes a
sunk cost?
a.) Sunk costs can’t be recovered
b.) Sunk costs have already been incurred
c.) Sunk costs are irrelevant
d.) All of the above
15. What is considered the ultimate
limiting factor in making choices?
a.) Wealth
b.) Knowledge
c.) Time
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