Production Possibilities Curve


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How will the public choice to provide health care effect what will be produced? What will be the costs? Is it possible to have free health care without forgoing consumption of another good? In this lesson, you will study a powerful tool for analyzing decisions. You will learn about scarcity, opportunity cost, and efficiency--three of the most fundamental economic concepts.


At the end of this lesson, you will be able to plot a production possibilities curve and calculate the opportunity cost of a choice. On a graph, you will be able to (1) show how an increase in an economy's technology affects the production possibilities curve; (2) explain efficiency using the production possibilities model; and (3) finally, using a production possibilities curve, show which points are attainable, efficient, and unattainable.



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


Complete this Production Possibilities Curve Quiz.


Economics predicts that you will consider the relative cost of your decisions. In other words, you will "build" your own production possibilities curve when you make a decision. Suppose you have homework to do but you also have soccer practice. How can you decide which activity to concentrate? Or should you try to do both? A PPC will help you see the opportunity cost of your decisions. Do as many pushups as you can in 30 seconds and record the number. Then solve addition problems for 30 seconds. Record that number. Using pushups and addition problems, plot a straight line PPC. Calculate the relative opportunity costs. Which activity do you have the lowest opportunity cost? If you behave economically, chances are you will engage in the activity with the lowest opportunity cost.