Introduction to the Production Possibilities Curve (PPC)As you know, the basic economic problem is scarcity. Since we do not have enough scarce resources to satisfyeveryone's needs and wants, we all have to make choices. We must choose how to spend our time, our energy, ourmoney, and our material possessions, and for every choice that is made, a cost is suffered.The relationship between choice and cost can be shown in a graph called a production possibilities curve, or PPC. Forexample, consider a student who has 4 hours of free time in the evening. He or she can choose to spend some, all, ornone of those 4 hours studying for a test the following day. He or she could also use the time to catch up on sleep.These choices can be graphed:Choice A - spend all 4 hours studyingChoice B- spend 2 hours studying, and 2 hours getting extra sleepChoice C- spend all 4 hours sleepingOf course, other combinations of the 4 hours exist.The student could study for 3.5 hours, and get an extra halfhour of sleep, or study for only 1 hour and sleep the other 3.DIf ALL of the student's choices were graphed, they wouldform a line that is made up of an infinite number of points.We call that line, which shows all of the ways the student's2 34.resource of 4 hours can be spent a "production possibilities curve."1STUDYINGNotice, point "F" on the graph is outside the PPC. That is because itrepresents a combination (4 hours studying and 2 hours sleeping)that is greater than the resources available of 4 hours. Point F, therefore, is not an option that can be reached.Other choices can be graphed, as well, other than time. We can also graph how funds can be spent.АСTIVITY:20-Consider a student who received $20 for his or her birthday. How couldthe funds be used? Create a PPC graph (at left) to show some of the15+student's choices.1. Think of two school-appropriate categories for spending thetotal funds ($20). Place the categories on the blank graph,10+one on the X-axis, and one on the Y-axis.2. Plot three or more combinations to show how the fundsculd be spent. Label them points A, B, and C.3. Connect the points to create a line. Label the line "PPC."1015204. Plot a point outside the PPC. Label it point F.5. Explain why Point F cannot be reached.SLEEPING

Production possibility curve illustrates the possible combination of two products that can be…

АСTIVITY: 20- Consider a student who received $20 for his or her birthday. How could the funds be used? Create a PPC graph (at left) to show some of the 15+ student's choices. 1. Think of two school-appropriate categories for spending the total funds ($20). Place the categories on the blank graph, 10+ one on the X-axis, and one on the Y-axis. 2. Plot three or more combinations to show how the funds could be spent. Label them points A, B, and C. 3. Connect the points to create a line. Label the line "PPC." 4. Plot a point outside the PPC. Label it point F. 5. Explain why Point F cannot be reached. 10 15 20

АСTIVITY: 20- Consider a student who received $20 for his or her birthday. How could the funds be used? Create a PPC graph (at left) to show some of the 15+ student's choices. 1. Think of two school-appropriate categories for spending the total funds ($20). Place the categories on the blank graph, 10+ one on the X-axis, and one on the Y-axis. 2. Plot three or more combinations to show how the funds could be spent. Label them points A, B, and C. 3. Connect the points to create a line. Label the line "PPC." 4. Plot a point outside the PPC. Label it point F. 5. Explain why Point F cannot be reached. 10 15 20

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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