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Students will apply the concepts of scarcity, choice, and opportunity costs using a production possibilities curve. Students will interpret points inside and outside the curve. As an extension, students will see the relationship between a country's aggregate production function and its production possibilities curve.

KEY CONCEPTS

Choice, Opportunity Cost, Scarcity, Trade-off

STUDENTS WILL

  • Explain "efficiency" using a production possibilities curve.
  • Calculate the opportunity cost of consuming the marginal quantity of good X.
  • Graph a production possibilities curve from a table.
  • Graph a production possibilities curve from an equation.

INTRODUCTION

The production possibilities curve is an excellent tool for showing scarcity, opportunity cost, and allocation of goods and services. The model is used to explain economic growth and efficiency for an economy. For teachers who want to help students piece together macroeconomic concepts, an exciting advanced analysis is added to the student worksheet that ties a country's aggregate production function to the production possibilities curve.

MATERIALS


PROCESS

CONCLUSION

This lesson shows students the most basic and important foundations of macro and microeconomics. Students should now be able to discuss production possibility curves and work out production possibility curves with respect to individual problems.

ASSESSMENT ACTIVITY

Ask your students to complete this Production Possibilities Curve Quiz.

1. Which of the following are assumptions underlying the PPC?
a. [Only two goods are produced]
b. Technology, population, and capital are variable.
c. Prices determine the position on the PPC.
d. All the above.

2. Efficiency along the PPC implies,
a. Goods are produced quickly
b. The state of technology is maximized
c. [In order to get more of a good, some of another must be given up]
d. Goods are distributed equitably

3. Which of the following would not shift an economy's PPC?
a. An increase in population
b. Doubling the amount of capital in the economy
c. [An increase in the money supply]
d. A technological advance

4. What determines the opportunity cost along a PPC?
a. The kinds of goods being produced
b. [The slope of the PPC]
c. Choices made by the economy
d. The area under the PPC

5. An economy has a constant cost PPC. What do you know about the slope?
a. [A straight line]
b. Bowed in
c. Bowed out
d. Convex to origin

6. What statement below implies that a PPC will be an increasing cost curve?
a. Resources are scarce
b. [Most resources are more productive in certain uses than others]
c. Underemployment of productive resources
d. Diminishing marginal returns to scale

7. A PPC shows,
a. The best combination of goods to produce
b. The plans for increasing output in the short run
c. [What can be produced with various combinations of resources]
d. Resources are constrained by choices

EXTENSION ACTIVITY

Ask students to build their own PPC. Have a student do as many pushups as he or she can in 30 seconds and record the number. Then have the same student solve addition problems for 30 seconds. Record that number. Using pushups and addition problems, plot a straight line PPC. Calculate the relative opportunity costs. If you want a concaved PPC, have the student complete both pushups and addition problems in the 30 second time period. Record and plot the data.

EDUCATOR REVIEWS

  • “This is a great new tool to use to increase understanding of a new concept. It is especially useful due the the video -- for visual learners and it comes at the beginning of the course to help defray the initial fear of the "dismal science"-- Macroeconomics. I am thrilled and will pass on to my team members.”

    Susan s., Plano, TX   POSTED ON December 16, 2011

  • “Great results with my survey course. May even give it a shot next year with the AP Macro group.”

    Steven D., La Crosse, WI   POSTED ON January 29, 2013

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