Production Possibilities Curve
Students will be able to:
- Explain a production possibilities curve.
- Use a production possibilities to curve to calculate opportunity costs.
In this economics lesson, students will use a production possibilities curve to learn about scarcity and opportunity cost.
The production possibilities curve is a good tool for illustrating the concepts of scarcity, opportunity cost and the allocation of resources in an economic system. Distribute copies of the warm-up activity. Tell students to read the article, “Will Grier Headlines Growing List of College Football Stars Skipping Bowl Games” about football players skipping bowl games and answer the questions at the end. Review their answers, reminding students that everyone must make choices because of scarcity (unlimited wants and limited resources). Explain that this lesson will focus on the way societies/countries make choices about what to produce with its limited supply of resources.
Introduce the production possibilities curve by telling students that governments (societies, countries, economic systems) make choices about what to produce with their limited resources; therefore, they cannot produce everything they want in unlimited quantities. At some point, governments must decide three questions: what to produce, how to produce, and for whom to produce. The production possibilities curve helps to answer those questions. Use the YouTube video Production Possibilities Curve-Econ 1.1 to help students understand the basic principles of a production possibilities curve. Encourage them to take notes during the video because they will need the information to complete the group and individual activities.
Put students in small groups and distribute copies of the Production Possibilities Curve group activity, showing the production possibilities curve for the country of Alpha. This activity requires them to apply what they have learned by using the information on the curve to answer a series of questions. Review their answers after they have completed the exercise using Production Possibilities Curve Answers.
Have students read the chapter on Production Possibilities Curve posted in Economics: The Study of Choice: FlatWorld Knowledge, Section 2.3. Tell them to complete the Try It! activity at the end of the lesson. (Note: answers to the activity are included in the reading.) This reading is from Economics: The Study of Choice: FlatWorld Knowledge, and it has an online presentation powerpoint on the Production Possibilities Curve located in Chapter 2, Section 3. Information is free to use online but must be purchased to print. The Textbook or Chapter is available for purchase online ($2.49 per chapter, $24.95 book)
Play the Kahoot! Game with your class. Divide the students into teams or play using 1-1 devices.
Economics allows you to consider the relative cost of your decisions. In other words, you can “build” your own production possibilities curve when you make a decision. Suppose you have homework to do but you would prefer working out to improve your soccer game before the next practice. And, of course, you have limited time to complete both activities. How can you decide which one you should do? Or should you try to do both? A PPC will help you see the opportunity cost of your decisions. Try this: Do as many pushups as you can in 30 seconds and record the number. Then, solve as many homework problems as possible in 30 seconds. Record that number. Using pushups on one axis and homework problems on the other, plot a straight line PPC. Calculate the relative opportunity costs. On 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. However, you may also need to consider the potential costs of not completing your homework!
This activity provides advanced mathematical analysis of the production possibilities curve using the following scenario. Student may prefer to use graph paper to complete the assignment.
Omega is a small tropical island that produces pearls (P) and fish (F). Omega’s production possibilities curve is given by P = 2L.5K.5 – .3F2 where L is the size of the labor force (400 people) and K is the number of capital goods which is 100. Have the students answer the following questions:
- What is the maximum number of fish that can be produced? Call this number F*. What is the maximum number of pearls that can be produced? Call this number P*.
- Calculate pearl production for points for theses combinations. F = 10, 20, 30, 36. Graph the PPC for Omega. Label the X-axis, Fish; label the Y-axis, Pearls.
- Is this PPC consistent with increasing costs?
- Is the output combination 1/2F*, 1/2P* attainable? Is this point efficient? Why or why not?
- What is the opportunity cost of more fish when 10 fish are produced? 20 fish? 30 fish?