This is a Clilstore unit. You can .
Right now you're learning about the first graph. In this class it's called the production possibilities curve.The production possibilities curve presents potential prospects for the production of a pair of products. It's a pillar of the program and pupils have to practice this graph. Is totally important first going to start off the table showed the production possibilities of too good, in this case videos and hats, and this example is actually for me if I quit teaching I spent all my time. I could make hats right using this loom have to look like this. Basically you wrap the yarn around this and it can wrap around itself and the hat kind of grows out from the bottom you kind of tie it off to the end.
As you can see from the chart if I spent all my time working on hats I could produce 30 hats in a week yeah. What's up bro if I spent all my time and resources making econ videos. I could make four videos but as you can see I wouldn't be able to make any hats. So this chart shows my production possibilities. It shows me the different combinations of hats and videos that I could make using all of my resources. To get the graph we just have to plot these points and that's going to give us a graph that looks like this
This is the production possibilities curve or sometimes called the production possibilities frontier. The best part about this graph is the fact that it shows all the key concepts that you've been learning so far. It's going to show scarcity trade-offs opportunity costs and efficiency
It shows the idea of scarcity because it shows that I cannot produce anywhere beyond the curve. So the curve or the frontier shows the idea that I have limited resources. The graph shows trade-offs because if I decide to start producing videos I have to give up hats or if I produce hats I have to give up videos
Opportunity cost is shown by the specific number of hats I give up when I make a video for example when I move from combination a to combination B I'm producing more videos but I'm also losing hats the number of hats I lost is the opportunity cost. In this case producing the first video cost me one hat this graph shows efficiency because if I'm producing a point right here where I'm producing only two videos and five hats. I am inefficient this is because I'm not using all of my resources the fullest. I'm not somewhere on the actual curve so when in combination inside the curve is inefficient because I could produce there, but I don't want to, I can't produce more of both godos. That means the line itself must be the idea of efficiency.
If I'm producing any one of these combinations I'm using all my resources to the fullest and again a point here outside the curve is impossible because I don't have enough resources to get there. Look the curve can shift but wait for it that comes later right.
Now it's time for you to practice calculating opportunity costs so I want you to use the table and figure out the opportunity cost from each one of these. So calculate the opportunity cost from A to B to C from C to D and from C to A.
Remember opportunity cost is what we're giving up and so look for the thing that
we're losing. Don't forget to clarify if I'm giving up hats or if I'm giving up videos the opportunity costs from A to D is 15 hats.
Notice from combination A we're producing 0 videos and 30 hats. Now when we go over here to D we're going to have 3 videos. I'm going to have 15 hats that means we lost 15 hats. That's the opportunity cost.
The opportunity cost from combination B to C is 4 hats. The opportunity cost from E to D is 1 video and the opportunity cost from combination C to combination A is 2 videos.
Now it's super important to be able to calculate opportunity cost but we're not done. Let's do different examples. So in this case let's do corn and wheat and let's do cactus and pineapple. It turns out that the shape of the curve is very important, so this top one shows a constant opportunity cost between corn and wheat. This is because the resources to produce corn and wheat, the ground, the climates are very similar, so you produce a certain amount of wheat you give it a certain amount of corn and we produce that same amount of wheat. You give up the same amount of corn that shows constant opportunity costs but down here when it comes to cactus and pineapples when you produce a very first pineapple you give up just a little bit of cactus. We produce the next pineapple you give up even more the next one even born the last one a whole lot of cats, you give up.
This is called increasing opportunity cost, is because the resources the land and climate to produce pineapples and cactus are completely different but the plural of cactuses is cacti. Wow, tiny. So when we first start producing pineapples we're gonna give up just a little bit of tech done. This is because we're going to use the land that's more suited towards pineapples and it's not very good at producing cacti and so we're gonna lose a little bit of cacti and get a good amount of pineapples now.
As we keep doing that over and over again we're going to give up more and more cacti this is because we're using resources that are less and less suited towards pineapples until finally right here you're producing just a little bit more pineapples but giving up a whole lot of cacti and this is the idea of the law of increasing opportunity cost. The law says as you produce anything the opportunity cost to produce it is going to get bigger and bigger and that explains the shape of the grass. Remember a straight line production possibilities curve like chose constant opportunity cost and abode out curve shows the idea of increasing opportunity cost.
Now if you liked this video make sure to subscribe and you can learn more about the production possibilities curve and how it shifts by clicking on this video or you can go look at unit 1 videos by clicking right here now make sure to come back to the channel because I'm making a ton of new videos this year alright
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