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you will learn about the following:

*What is a Constant Cost Production-Possibilities Graph

(Linear)?

*What is Increasing Cost Production-Possibilities Graph

(Concaved to the Origin)?

*What is Absolute Advantage?

*What is Comparative Advantage?

*What is Specialization?

*What is Considered to be a Good Terms of Trade?

Production-Possibilities Curve/Frontier |

describes the concept of opportunity cost at

several levels. We will start by looking at an

orchard where you have a choice of planting

either an apple tree or an orange tree. If you plant

an apple tree in one spot, you can't plant an

orange tree in that same spot. So the opportunity

cost of an apple tree is an orange tree.

an apple tree where an orange tree is growing. To plant

an apple tree, you must give up planting an orange tree

and visa versa. So the opportunity cost of one orange

tree is one apple tree. This is an example of a Constant

Cost Production-Possibilities Frontier/Curve.

However, let's say that you can plant two apple trees

where only one orange tree can grow. Then the

opportunity cost of one orange tree = two apple trees. It

can also be stated that the opportunity cost of one apple

tree = 1/2 orange tree.

efficiency of the use of the resources, then the entire

production-possibilities curve SHIFTS.

If you can remember the following five changes in

resources, then you can determine that the production

possibilities curve has also changed.

1. Change in the productive labor force (productivity).

2. Change in the quantity and quality of natural

resources.

3. Change in the quantity and quality of capital stock

(factories, equipment, machinery, etc.)

4. Change in health and education.

5. Change in technology.

So a change in any above, shifts the

production-possibilities frontier/curve outward.

click on the number of apples and number of oranges

columns to see what the opportunity cost of one

apple is for one orange and visa versa.

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On the table below, drag the appropriate term

inside the

column's

term will stay inside the

are incorrect, the term will bounce back to its

original position.

After dragging the term to the correct yellow

rectangle, show the effect by using the graph to

the right. For your answers you will either drag

the PPF curve inward or outward or drag the

dot(s) onto the graph.

(Linear)?

(Bowed Outward)?

production-possibilities frontier/curve is bowed out from

the origin. Moving either way up or down the axes, the

cost of moving from one point on the curve to another

point on the curve is increasing. Looking at the two

increasing cost production-possibilities frontiers below,

click on the next button to understand the concept of

increasing costs.

Steven M. ReffEconomics Lecturer University of Arizona (2007 - 2016) The 2015 University of Arizona Five-Star Faculty Award |

Outward.

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produces 10 oranges. Follow the directions below the graph.

case--land), then you can operate either ON the

production-possibilities curve if you are at full

potential (using the resource of land as

EFFICIENTLY as possible) or INSIDE the

production-possibilities curve if you are BELOW full

potential (using the resource of land

INEFFICIENTLY). You have also learned that you

cannot get to a point OUTSIDE the

production-possibilities curve with the fixed amount

of resources (land, in this case) at this particular

point in time.

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FullScreen |

Curve/Frontier you have learned about the

following:

*Constant Cost Production-Possibilities Graph

(Linear)

*Increasing Cost Production-Possibilities Graph

(Concaved to the Origin)

*Absolute Advantage

*Comparative Advantage

*Specialization

*Terms of Trade

Using the information below the graphs, show the correct answer on the

graph to the left by dragging the A or B dots or the entire curve. When you

are finished doing that, draw your answers on the graph to the right.

1. Efficient Use of Resources

2. Unattainable on Your Own

3. Inefficient Use of Resources

4. Simultaneous increase in Both X & Y

5. To produce one efficiently, you give up

more of the other

7. Efficient & Simultaneous decrease in X & Y

8. Inefficient and Increase production of only

Good Y

9. Efficient and Decrease production of only

Good X

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