12. PROPERTY RESOURCES LAND CAPITAL HUMAN RESOURCES LABOR ENTREPRENEURIAL ABILITY SCARCE RESOURCES ECONOMIC RESOURCES Also known as the Input Factors of Production
17. PRODUCTION POSSIBILITIES Assumes... Full Employment and Productive Efficiency Fixed Resources Fixed Technology Two Goods for example... A Consumer Good PIZZA
18. Two Goods Fixed Resources Fixed Technology Assumes... Full Employment and Productive Efficiency PRODUCTION POSSIBILITIES for example... A Capital Good Robots
19. Using all of our resources, to get some pizza, we must give up some robots! for example... What if we could only produce ... 10,000 Robots or 400,000 Pizzas PRODUCTION POSSIBILITIES
20. PIZZA 0 1 2 3 4 (in hundred thousands) ROBOTS 10 9 7 4 0 (in thousands) in table form PRODUCTION POSSIBILITIES
21. PIZZA 0 1 2 3 4 (in hundred thousands) ROBOTS 10 9 7 4 0 (in thousands) in table form graphical form Robots (thousands) Pizzas (hundred thousands) PRODUCTION POSSIBILITIES
22. PIZZA 0 1 2 3 4 (in hundred thousands) ROBOTS 10 9 7 4 0 (in thousands) in table form graphical form Robots (thousands) Pizzas (hundred thousands) PRODUCTION POSSIBILITIES
23. PIZZA 0 1 2 3 4 (in hundred thousands) ROBOTS 10 9 7 4 0 (in thousands) in table form graphical form Robots (thousands) Pizzas (hundred thousands) PRODUCTION POSSIBILITIES
24. PIZZA 0 1 2 3 4 (in hundred thousands) ROBOTS 10 9 7 4 0 (in thousands) in table form graphical form Robots (thousands) Pizzas (hundred thousands) PRODUCTION POSSIBILITIES
25. PIZZA 0 1 2 3 4 (in hundred thousands) ROBOTS 10 9 7 4 0 (in thousands) in table form graphical form Robots (thousands) Pizzas (hundred thousands) PRODUCTION POSSIBILITIES
26. PIZZA 0 1 2 3 4 (in hundred thousands) ROBOTS 10 9 7 4 0 (in thousands) in table form graphical form Robots (thousands) Pizzas (hundred thousands) PRODUCTION POSSIBILITIES
27. At any point in time, a full-employment, full-production economy must sacrifice some of product X to obtain more of product Y . PRODUCTION POSSIBILITIES Limited Resources means a limited output...
28. Q Q Robots (thousands) Pizzas (hundred thousands) 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 A B C D E W Attainable but Inefficient Unattainable Attainable & Efficient PRODUCTION POSSIBILITIES
29. Q Q Robots (thousands) Pizzas (hundred thousands) 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 A B C D E W Attainable but Inefficient Unattainable Attainable & Efficient PRODUCTION POSSIBILITIES Notes... The amount of other products that must be forgone or sacrificed to obtain 1 unit of a specific product is called the opportunity cost of that good. LAW OF INCREASING OPPORTUNITY COSTS
30. Q Q Robots (thousands) Pizzas (hundred thousands) 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 A B C D E W Attainable but Inefficient Unattainable Attainable & Efficient PRODUCTION POSSIBILITIES Notes... LAW OF INCREASING OPPORTUNITY COSTS A graph of the production possibilities curve will be CONCAVE - bowed out from the origin. Economic resources are not completely adapt- able to other uses.
31. PRODUCTION POSSIBILITIES MC MB Allocative Efficiency: MB=MC MB=MC P Q Marginal Benefit & Cost Quantity of Pizzas $15 10 5 1 2 3
32. U Unemployment & Underemployment Shown by Point U More of either or both is possible PRODUCTION POSSIBILITIES Q Q Robots (thousands) Pizzas (hundred thousands) 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8
33. U Unemployment & Underemployment Shown by Point U More of either or both is possible PRODUCTION POSSIBILITIES Q Q Robots (thousands) Pizzas (hundred thousands) 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 Notes... Economic Growth The ability to produce a larger total output - a rightward shift of the production possibilities curve caused by...
34. U Unemployment & Underemployment Shown by Point U More of either or both is possible PRODUCTION POSSIBILITIES 1 – Increase in resource supplies 2 – Better resource quality 3 – Technological advances Q Q Robots (thousands) Pizzas (hundred thousands) 14 13 12 11 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 Notes... Economic Growth
36. Two Examples of Economic Growth ALTA - FAVORS PRESENT GOODS Goods for the Present Goods for the Future CURRENT CURVE FUTURE CURVE CONSUMPTION PRODUCTION POSSIBILITIES Alta
37. Two Examples of Economic Growth ALTA - FAVORS PRESENT GOODS ZORN - FAVORS FUTURE GOODS Goods for the Present Goods for the Future CURRENT CURVE FUTURE CURVE CONSUMPTION Goods for the Present Goods for the Future FUTURE CURVE CONSUMPTION CURRENT CURVE PRODUCTION POSSIBILITIES Alta Zorn
