An item that gratifies peoples needs and wants Capital Good An item that is used to produce other products Production Possibilities Schedule A table that shows the possible output combinations for an economy ID: 481309
Download Presentation The PPT/PDF document "Consumer Product" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Consumer ProductAn item that gratifies people’s needs and wantsCapital GoodAn item that is used to produce other productsProduction Possibilities ScheduleA table that shows the possible output combinations for an economyProduction Possibilities CurveA graph that shows the possible output combinations for an economy
1.3 The Production Possibilities ModelSlide2
A society must choose among possible combinations of 2 goods.
Production Possibilities Schedule
Production Possibilities
CurveSlide3
Law of Increasing Opportunity Costs (OC):The concept that as more of one item is produced by an economy, the opportunity cost of additional units of that product risesYou can see OC by moving from point to point along the PPFThe “bowing-out” shape of the curve shows that as more of one product if produced, its OC in terms of the other product increasesIncreasing Opportunity CostsSlide4
If a town starts if with 10,000 industrial machines (A), it cannot make any pizzas.
If the town decides to make 100, 000 pizzas, it can now only make 9,000 industrial machines (B)
The opportunity cost the first hundred thousand pizzas is one thousand industrial machines
If the town decides to makes 200,000 pizzas, it can now only make 7,000 industrial machines (C)
Notice: Opportunity Cost
increased
from 1,000 to 2,000 industrial machines for every 100,000 increase in pizzasSlide5
Economic GrowthAn increase in an economy’s total output of goods and servicesThis can happen due to:Rise in amount of available resourcesImprovement in technologyBoth these trends cause an outward shift in the PPF, thus, the amount of feasible output combinations expands
Economic GrowthSlide6
Just as an economy can grow, it can contract as wellThis can happen because:A society’s output of goods and services fallsDrop in amount of available resourcesExplaining the reasons for economic growth and contraction is one of the main topics in macroeconomicsEconomic ContractionSlide7
Computers – Capital GoodHamburgers – Consumption GoodHow does a society’s choice between the two affect the position of its future PPF?EXAMPLE
By choosing to produce more capital goods relative to consumption goods, a society can increase the amount of available resources
Important to focus on capital resources to achieve good rates of economic growth in a country
PPF Curve would shift
outwards