Production Possibilities Curve Review

Hey! How you doing Econ Students? This is Mr Clifford Welcome to ACDC Econ Right now you’ll learn about the first graph in this class, it’s called the production possibilities curve. The production possibilities curve (PPC) presents potential prospects for the production of a pair of products. It’s a pillar of the program that pupils have to practise. This graph is totally important… *Intro Music* First we’re going to start off with a table that shows the production possibilities of two goods. In this case, videos and hats. And this example is actually for me. If I quit teaching and spend all my time I can make hats, right ? using this loom, hats that look like…this Basically, you wrap the yarn around this and kind of wrap it around itself The hat kind of grows out from the bottom. You kind of tie it off at the end. As you can see from the chart if I spend all my time working on hats I can produce 30 hats in a week. Y,o what’s up bro?! If I spend all my time and resources making econ videos, I can 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 I can make, using all of my resources. To get the graph, you just have to plot these points. 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 have 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 decided 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 2 videos and 5 hats, I am inefficient. This is because I am not using all of my resources to the fullest I’m not somewhere on the actual curve. So any combination inside the curve is inefficient because I could produce there, but I don’t want to. I can produce more of both goods. This means the line itself must be the idea of efficiency. If I’m producing any 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 give there. But the curve can shift. But wait for it…that comes later. Right now it’s time for you to practice calculating opportunity cost. 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 D, to B to C, from E to D, and from C to A. Remember: opportunity cost is what we’re giving up. And so look for the thing we’re losing. Don’t forget to clarify if I’m giving up hats or if I’m giving up videos. The opportunity cost from A to D is 15 hats. Notice: from combination A we’re producing zero videos and 30 hats. Now when we go over here to D, we’re going to have 3 videos and we’re 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 one video. And the opportunity cost from combination C to combination A is two 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 climate, are very similar. So you produce a certain amount of wheat, you give up 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 cost. But down here, when it comes to cactus and pineapples, when you produce the very first pineapple, you have just a little bit of cactus. When you produce the next pineapple, you probably have more. The next one even more. And the last one…a whole of cactus you give up. This is called increasing opportunity cost. It’s because the resources; the land and climate, produce pineapple and cactus, are completely different. But the plural of cactuses-es is cacti WHAWAW! CACTI! CACTI! CACTI! So when we first start producing pineapples, we’re going to give up just a little bit of cacti. 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, so we’re going to 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, we are producing just a little bit more pineapples, but giving up a whole lot of cacti. CACTI! And this is the idea of the law of increasing opportunity cost. The law says that as you produce anything, the opportunity cost to produce it is going to get bigger and bigger. And that explains the shape of the graph. Remember: a straight line production possibilities curve, like this, shows constant opportunity cost and a bowed-out curve shows the idea of increasing opportunity cost. Now if you like 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 that you come back to the channel because I’m making a ton of new videos this year. Alright? ’til next time! The production possibilities curve p…[snap] The production possibilities c..curve… The (unintelligible) The production possibilities curve presents potential prospects for the production of two products. [clap] A pair of products. The production possibility [laugh] The production possibilities curve, the (unintelligible). The production possibilities curve protects [clap] Protects? Why would it protect?!

100 thoughts on “Production Possibilities Curve Review”

• James Public says:

I have been reading about this for two weeks now and I understood it in the first minute and a half that you explained it. Thank you very very much. Cacti-yee. lol.

• Cedric Bansah says:

I've been in about 5 2-hour lectures and didn't get a thing but your videos saved my life, man! Thanks!

• nhunka44 says:

Idk why but it's incredibly attractive when intelligence meets goofiness

• Milind Bandulal says:

OH MY GOD I HAVE BEEN SAVED FROM MY ECO EXAM

• Ritika Ritu says:

tomorrow is my exam and my class teacher is big no no when it comes to doing her job. but you're so freakin lively and explained the samething my teacher failed to explain in 50+ slides…

• RandomStix says:

Anyone know how to find the opportunity cost by drawing a ppc without being give a table of contents?

• Homaira Ansheri says:

I love you

If he started selling hats as merch know that I’d buy one immediately

• Tek Teng Foo says:

YOU LOST ME AT "WHAWAW! CACTI!! CACTI!!!" HAHAHAHA
Don't worry, my lecturer lost me at "Today we're gonna learn…"

• Bennedict Mwachirimba says:

You make me love econ more than women

• Phil W says:

Thank you very much for making these videos. The videos are very clear and useful.

• ASTRO_BANGTAN_ISMYLIFE says:

AC DC hell yesh ?❤

• leonard domingo says:

NICE BELT BRO… I MEAN IT

• Faith Kaluba Kaniki says:

you the best✌

• Katelyn Anne says:

Thank you for saving my grades lmao

• lookang lawrence wee says:

I have made an interactive simulation of the same topic. check it out http://iwant2study.org/ospsg/index.php/interactive-resources/others/economics/835-productionpossibilitycurve

• CHIAMAKA I says:

first i doubt you have sense how would you give an equation or example and not show how to calculate it first of all i love watching your videos because its easy to understand but this one you have no credit.

• Holy Electrum says:

Man I hate my professor

That belt

• Mohandas janakiammasong hits P says:

very nice explanation thanku jacob

4:35 ?

• aciara chan says:

thanks for helping me a lot !

• Haseeb Ather says:

ok so my exams are on and i couldnt understood a single about PPC but thanks man your cleared my mind

• Chris Rosson says:

Lol, switch to decaf!!

• theonethatflies says:

i think i finally understand —
4:27 it's supposed to be: we're using resources that are less and less suited towards cacti — this one word solved my life…sleeptime

Are you my economics guardian angel here to save me in this subject ?❤️? love the video and can’t wait to use you as my teacher through it all ?

• Lena Valenzuela says:

I love your videos but I think he should slow down a bit

• Shahzaib Hasan says:

Sir i have a doubt that why we are unable to produce more even after sacrificing more of hats by each and every successive production of videos, its like even after sacrificing more and more we are only able to produce only a single unit of videos…why is it so..

• Derrick Chikeluba says:

I'm really sorry but I didn't understand fully

Awesome!

• ThinIce says:

i have finals tomorrow wish me luck

• Zineb L says:

You make it so simple and fun! Thank you!

• Dipanker Sarker says:

pls visit https://www.youtube.com/watch?v=hXv7SlGve1s&t=5s for graphical Analysis

• Thiago Puchacello says:

AC DC belt. Nice!

Gay

so funny teacher i like the way of teaching you are using thank you

• Olivia Schultz says:

Thank you. just…..Thank you

• Trevor Brown says:

Took me 1 minute and 6 seconds to learn this?

• J says:

Lol @ acdc belt. I wish he was my professor

• Nandrea Walker says:

Thank you very much, and you're very funny

Oh yeah yeah

• Aduko Martin Lutherking Videos says:

Cactii… May GOD bless you.

• Rex Productions says:

man really hoping to get one of them hats

• Zeuses Coven says:

How did he calculate I still don't get it help

Great sir ??

• YOLO says:

plural of cactus??

You make it sooooo much easier THANK YOU!!!

• greentebrehs says:

I'm abit confused. Isn't the minute of 4:28 it is supposed to be "resources that are less and less suited towards cacti?

CATCI!!!

• H k says:

5.35 so it’s a nay to you producing hats?

• Saif Kilani says:

I love you man

• unicorn light says:

I give up class to watch your videos

4:35 Lol

• nobuhledubem says:

Thank you for all your videos

• m f says:

I love u papa clifford

• Jajel22 says:

i love this man

• Hoàng Nguyễn says:

Thank you very much for this video, really really easy to understand <3

• Hajji Mussa says:

Tom is a full-time lecturer at a private higher education institution and is considering a career in carpentry. He wishes to pursue a career in carpentry (a childhood dream) which he has studied part-time and is now equipped to take on clients. In his current position he earns a rate of R1000 per day and if he were to pursue a career in carpentry he would earn R800 per day. Due to the flexibility of the employment conditions at the higher education institution he works for, Tom can negotiate the number of days he works at and will receive a rate of remuneration based on the number of days worked.

Question 1 1.1 Construct a production possibility frontier to illustrate Tom’s earnings potential between the two careers if initially he was not working as a carpenter, then he worked one week per month, then two, then three and finally four weeks per month (assuming only four weeks in a month). (5 marks)

1.2 Discuss the underlying assumption of the shape of the above drawn diagram and comment on how

likely this could be true with respect the above scenario. (6 marks)

1.3 Discuss a factor that would lead to an outward shift of the diagram drawn in 1.1 and illustrate this on

the diagram drawn. (5 marks)

1.4 Discuss a factor that could lead to an inward shift of the curve drawn. (4 marks)

1.5 In the labour market for carpenters, the current market clearing wage rate is R800 per day. With the aid of a diagram, discuss the welfare effects of government intervention in the form of legislation that sets the minimum wage rate for a carpenter at R1000 per day.

• Nurul Asyiqin says:

THANK U ???

man you are literally the best fucking teacher everrrrrrrrrrrrrrrrrrrrrrrrrrrr !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

• Cass Repsac says:

man…. you talk fast. Great video

• Dr. Ravindra Kumar Rohilla says:

Nice sir, thanks

• Mehedi Hasan Meraj says:

Is it possible to have decreasing opportunity cost?

• Oscar Ho says:

You are x1000000times way better than my lecturer. Think I’m going to skip my lecture class start from tomorrow

• Keshav Moudgil says:

This guy is the opposite of my Econ teacher

Thank you

• praveen shrestha says:

I watched most of the videos of my course from your channel and went to take my exam. Thanks a lot, I will pass.
seriously Thanks, I can confidently say I will pass.

• Arifa Khalil says:

okay its easy understanding but why are you shouting dude??? 🙂

• Bla Bla says:

fucking hell cringe af

4:35 what you see before you die

• PedroFM says:

Mark Cuban here helping me get a 7 in IB Econ

• VINNY MARIA says:

That was really good. I give you five cacti? out of five

• Mimi que says:

How amazing are you!!

Hahahaha
Ur like cat ?

Cacti !!!!

Thanks Sir

• R D says:

I Understood Ppc Curve Because Of Your Easier Example

• Andy Morris says:

You, Sir, are a legend. I have exams in two weeks. Thanks for saving my life. Yeeha!

• Andy Morris says:

Love the ACDC belt lol

CACTI!

• Satheesh Kumar says:

This should come out from experience…wats the use of learning through graph…

• Oluwalani Ajeigbe says:

THANKS MY MAN THIS VIDEO WAS VERY HELPFUL THANK YOU AND GOD BLESS YOU EXPLAINED IT BETTER THAN MY TEACHER IN SCHOOL IN YEAR 9 GRANGE SCHOOL IKEJA,GRA LAGOS SO FOR THAT I SUBSCRIBED AND LIKEDTHE VIDEO WAS AGAIN THANKS

• juddah magaway says:

im studying but accidentally i found it funny at 0:00 so i repeat and reapat it lol hahaha

• Saud Kiani says:

I love your videos man. "Hats" off to you 🙂

• Kariuki Justine says:

Best revision videos for igcse economics

• Marvin Yancor says:

Excellent video. Thanks for sharing!

c a c t i

• Maidah Sali says:

thanks bro…this really help me…

• ryn zey says:

still hard for me hahaa

• Nikko Mitsuhe says:

What if for example the videos in on left while hats below is that okay?

• Twapandula Fiyo-alushe Nghiueuelekwa says:

You are too fast

• Roshan Dharua says:

Sir I am in love with You…?

Thnk u sir

Thank you