Production Possibility Curve

This clip introduces the production possibility curve, then shows how we can consider choices on allocating a scarce resource (in this case study time), and finally introduces us to the concept of opportunity cost.

Category:

Education

Tags:

• Production
• Possibility
• Curve

[feverpitch82]

I dont get why points a, b, c and d are in the positions they are in on the curve....why are they placed on those particular points of the curve?

[PlainSenseEconomics]

@feverpitch82 those three points are just samples - nothing special about them. What is special is that we define the production possibility curve as being all the various combinations of history and economic grades where you are using your scarce resource (time) efficiently. So, points A, B, and C are all efficient combinations, but then the question is which one is best for you. That's where you apply your own sense of priorities.

[PUPPIDOGG]

What program do you use to draw these diagrams?

[PlainSenseEconomics]

@PUPPIDOGG Hmm - I thought I had answered this question earlier, but I don't see it here. I use a Mac and the application is called OmniGraphSketcher

[PlainSenseEconomics]

@PUPPIDOGG Hmm - I thought I had answered this question earlier, but I don't see it here. I use a Mac and the application is called OmniGraphSketcher YouTube doesn't let me post a URL but you can Google it.

[PUPPIDOGG]

Great Example. Is it possible to enter a third variable in the equation as most students don't take just 2 classes at once? Or would you have to do multiple PPC's with 2 variables at a time? Look forward to more videos...CA

[PlainSenseEconomics]

@PUPPIDOGG Conceptually you can have any number of dimensions - it just gets hard to draw or imagine them. I see the production possibility curve as a help in understanding that we all face trade-offs when we make decisions. As I believe I mention in the clip, we can't use the PPC alone to make the "right" decision. The important takeaways are: there are always opportunity costs, and very often as you approach the ends of the PPC, the opportunity costs grow larger.

[jemibanez]

Its shaped that way(concaved) is due to the concept of The Law of of Increasing Opportunity Cost....

[LloydHollywood]

first of all the economy really has nothing to do with long term history, it's a new term. Economy v.s. Ecology is more prudent to the Curve. Even oil water. Any one. Some one else can do the math.

[PlainSenseEconomics]

Good question - and important, too. I'll try the short answer first. If you move along the PPC you give up one output, like your History grade in order to do better on the other. Does it make sense though that this trade-off remains the same? Let's say you've already spent 5 hours on Econ. Will studying one more hour of Econ have the same impact as the first hour you studied? Probably not. The tradeoff changes.