The PP Curve

E Q : H O W D O N AT I O N S I N C R E A S E T H E I R W E A LT H ?

THE PP CURVE

You must make yourselfworse off in the short runto make yourself betteroff in the long run.

Study

Leisure

Peanuts

Oranges

CapitalGoods

ConsumptionGoods

http://www.bradyworld.com/cover/minnow.jpg

The ship set ground on the shore of this uncharted desert isle

http://images.google.com/imgres?imgurl=www.timvp.com/gillign2.jpg&imgrefurl=http://www.timvp.com/gilligan.html&h=270&w=295&prev=/images%3Fq%3Dgilligan%2527s%2Bisland%26svnum%3D10%26hl%3Den%26lr%3D%26ie%3DUTF-8%26oe%3DUTF-8

http://www.tasaday.com/images/_sl-003.jpg

http://www.coracle-fishing.net/corac-pix2/net-11x.jpg

http://www.surfingforlife.com/g/cult_b10.jpg

http://www.zeroimpactproductions.com/seine-over-freezer.jpg

http://www.riveroflifefarm.com/images/lodging/th/th2/tree-house-summer.jpg

CapitalGoods

ConsumptionGoods

By producing more capital goodsrelative to consumption goods,the economy’s Production-possibilites curve to shifts OUTWARD and shifts outward FASTER.

Capital

Consumption

If the PP shifts outward

This is GOOD!

Capital

Consumption

If the PP shifts inward

This is BAD!!

CapitalGoods

ConsumptionGoodsThere are five variables that

shift the PP outward--

Five Variables that Shift the PP Outward:

1. Increase the productive labor force (productivity).2. Increase the quantity and quality of natural resources.3. Increase the quantity and quality of capital.4. Increase health and education.5. Increase technology.

Capital

Consumption

Japan 1941

What capital goods did Japanproducein 1940?

What consumptiongoods did it produce?

rice

What did Japan do on December 7, 1941 ?

Capital

Consumption

Japan 1945

rice

What did the U.S. do toJapan for this dirty deed?

http://www.nhc.rtp.nc.us:8080/tserve/nattrans/ntimages/hiroshima.jpg

http://www.archives.gov/digital_classroom/history_day/bright_ideas/images/nagasaki.gif

Hiroshima

Nagasaki

morning of August 6, 1945

11:02 am, August 9, 1945

Capital

Consumption

Japan 1945

rice

What do you think happenedto Japan’s productive labor force?

Capital

Consumption

Japan 1945

rice

What do you think happenedto the quantity and quality of its natural resources?

Capital

Consumption

Japan 1945

rice

What do you think happened tothe quantity and quality of its capital stock?

Capital

Consumption

Japan 1945

rice

What do you think happened toits health and education?

http://hiroshima.tomato.nu/image/park_ma/e11-10.jpg

Capital

Consumption

Japan 1945

rice

What do you think happened toits technology?

Capital

Consumption

Japan 1945

rice

What happened to Japan’sPP?

CapitalGoods

ConsumptionGoods

http://www.ellsworthamerican.com/archive/news2000/08-24-00/news3_08-24-00b.gif

CapitalGoods

ConsumptionGoods

CapitalGoods

ConsumptionGoods

Guns

Butter

Military

Consumption goods

WHAT ARE SOME EXAMPLES OF CAPITAL GOODS?