 The Production Possibility Model A production possibility model demonstrates the different combinations that could be produced from a fixed quantity of productive resources. To begin, let's look at the structure of a production possibility model. First, there is a title to let the reader know exactly what you are graphing. The title is a combination of product 1 and product 2 that the ACME company produces. Second, the graphs X and Y axes are labeled. This is where you place your two products. Make sure the names of the products are placed on separate axes. Third is segmentation. It is crucial that both axes are segmented into the same units and increments. It is necessary to segment evenly so the data are accurately represented. Now let's label the horizontal axis skateboards and label the vertical axis snowboards. Then we will need to come up with a title at the top of the graph. Next is segmenting the graph. To begin, the ACME company tells us it is a small company with a fixed number of employees and resources. What most of the company could produce in one day is 75 skateboards or 50 snowboards. Because we have small numbers with which to work, an increment of 5 is fine. The ACME company wants us to create a production possibility model for the company. Here is the information ACME has given us. If all of ACME's resources are dedicated only to skateboards, in one day the company can produce 75 skateboards and zero snowboards. Next, let's plot the combination of production possibilities for snowboards and skateboards on our graph. ACME can produce 75 skateboards, but if it produces all 75 skateboards, it cannot produce any snowboards due to limited resources. The skateboards on the horizontal axis, number 75, place the dot on 75. Because zero snowboards on the vertical axis were produced, we do not need to move our dot up or down. Label the dot A at 75 on the horizontal axis and zero on the vertical axis. Next we will label the dot B at 67 on the horizontal axis and 15 on the vertical axis. Next we will label dot C at 55 on the horizontal axis and 25 on the vertical axis. Next we'll be dot D at 30 on the horizontal axis and 40 on the vertical axis. Next we have dot E at 15 on the horizontal axis and 45 on the vertical axis. Finally is dot F at zero on the horizontal axis and 50 on the vertical axis. Now using the coordinates we have plotted on the graph, we connect the dots. You have now created a production possibilities curve. Notice that when ACME produces 30 skateboards, it can also produce 40 snowboards with the resources it has. This exemplifies for us the definition of the production possibility model, a model that demonstrates the different combinations that could be produced from a fixed quantity of productive resources. Therefore, if it's summertime and people are asking for more skateboards, ACME will produce fewer snowboards and more skateboards. Notice that ACME needs to buy new machinery or employ more workers to produce more of both products. Notice that an increase in the number of people wanting the product does not push the curve out. ACME will simply satisfy the customers' wants by producing more of one product than the other. So once again, in order for ACME to produce more of both products, it needs to buy more machinery or hire more people to work longer shifts. As you can see, a production possibilities model helps us to better understand the different combinations of goods that could be produced from a fixed number of productive resources. You have completed this activity, the production possibility model.