Lesson 1.04 Production Possibilities Frontier

• Introduction
• Learn
• Try It
• Task

Introduction

In this unit, you have learned that every decision you make involves opportunity cost. When you decide to do something, buy something, make something or provide benefits to someone, you are giving up an opportunity to do something else. While the idea of opportunity costs can seem abstract, a good visual representation of the idea of opportunity cost can be represented in the Production Possibilities Frontier (PPF). The PPF graphically represents the point at which an economy is most efficiently producing its goods and services and, therefore, allocating its resources in the best way possible.

By the end of this unit you will be able to understand all of the important points represented in the PPF, and how it very easily represents the idea of opportunity costs. The PPF not only helps people make decisions, but understands the tradeoffs of these decisions.

 

 

Lesson Objectives Following successful completion of this lesson, students will be able to: apply the concept of opportunity cost to a production possibilities curve. graph production possibilities schedules from hypothetical data. analyze the significance of different locations on, above and below a production possibilities curve. The above objectives correspond with the Alabama Course of Study: Economics objective(s): 2.1.