Final Ppp on Ppf

8/7/2019 Final Ppp on Ppf

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PRODUCTION POSSIBILITIES

FRONTIER


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ProductionPossibilities Frontier

Describe the production possibilitiesfrontier and explain its shape.

Explain what causes the production

possibilities frontier to shift.

Objectives


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Production PossibilitiesFrontier

production possibilities frontier (PPF)efficiency

law of increasing opportunity cost

economic growth

Key Terms


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Efficiency and Production

Possibilities Frontier PPF model Shows possible combinations of 2 types ofgoods that can be produced when available

resources are used fully and efficientlyFigure 2.1

Inefficient and unattainable productionPoint I and U on the curve

Shape of the PPFAny movement along PPF involves giving up

something


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Production Possibilities

Frontier PPF Figure 2.1A through Fare

attainable

I representsinefficient useof resources

U represents

unattainablecombinations


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Efficiency and ProductionPossibilities Frontier

The resources in an economy are not allperfectly adaptable

Law of increasing opportunity cost eachadditional increment of one good requiresthe economy to give up larger incrementsof other good

The PPF has a bowed-out shape due to the

law of increasing opportunity cost


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Shifts in the PPF

Economic Growth an expansion in theeconomies ability to produce

Changes in resource availabilityIncrease (more labor) PPF shifts outward

Decrease (less resources) PPF shiftsinward

Increases in stock of capital goodsTechnological change


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Dubai Mega Projects


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Hongkong Disneyland Park


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Private subway line to go toHongkong Disneyland


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Transportation Station


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Reception Area


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Typical main street


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One of the shops at the park


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Shops in the main streets


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Dubai Palm Island (2000 villas, shoppingcomplex, cinema, marine park, beaches, etc.


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Hydropolis Underwater Hotel

Currently underconstruction inDubai, Hydropolisis the world's firstluxury underwaterhotel. It will includethree elements: theland station, whereguests will be

welcomed, theconnecting tunnel,which will transportpeople by train to

the


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Hydropolis Underwater Hotel

people by train to themain area of thehotel, and the 220suites within thesubmarine leisure

complex. It is one ofthe largestcontemporaryconstruction projects

in the world,covering an area of260 hectares, aboutthe size of London'sHyde Park.


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The ballroom,located at this

nerve centre, willhave asymmetricalpathwaysconnecting the

different storeysalong ramps. Alarge, petal-likeretracting roof will

enable the stagingof open-skyevents. Staircases,lifts and ramps will

provide access to


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ballroom, whileflanking catering

areas will supplybanquets andreceptions.


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The land stationalso includes arestaurant andhigh-tech cinemascreening theevolution of lifein the ocean andthe history ofunderwaterarchitecture. Asa finale, thescreen will opento reveal thereal-lifeHydropolis.


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A viewing platformat the frontopening of thespanning roofwill allow viewsof thearchitecture aswell as the lightshows ofHydropolis.


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A house on the rock


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Maximizing Effectiveness


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Now, creating something

out of nothing..

That is also one way we canincrease our UTILITY, ourusefulness.. our

WORTH.. our Countrysincome


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Sand Sculpture to attract

tourism


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Tourism brings in a lot ofincome for the country..


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Not all tourist spots are dueto natures riches


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Man creative as he is, cancreate events..


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.to attract people to cometo a particular place..


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..either as a domestic orforeign tourist..,,,,


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..the bottom line is.. LETPEOPLE COME.


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When people come to visit, they eat, theyhave to sleep in hotels, they buy

souvenirs. Tourism is one of the biggestsource of income for a country.


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Have you heard ofHIROSHIMA,NAKASAKI?

What have you heardabout the place?


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Hiroshima, 64 years ago.


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Hiroshima, 64 years ago.

Si th b bi i 1945


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Since the bombings in 1945,here is HIROSHIMA now..

Si th b bi i 1945


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Si th b bi i 1945


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Si th b bi i 1945


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All other Asian countries are expanding

their countrys PRODUCTIONPOSSIBILITIES FRONTIER..

Philippines used to be the most

progressive among all of these Asiancountries. They come to study in ouruniversities, they come to learn how toplant rice, they come to learn how to

speak English, THEY COME TOLEARN FROM US.


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Now, in the present ratings of Asian

countries based on their countrysearnings, WE ARE SECOND TO THEBOTTOM. The last, which isVIETNAM.

Until when will we in the second to thelast?

Is there a possibility that we can move

upwards?OR ALLOW VIETNAM TO OVERTAKE

US?


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Shifts in the PPF

Increase in available resources Decrease in available resources


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Why is the PPF a bowed outshape?

Increase in available resources Decrease in available resources


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Absolute Advantage

Comparative Advantageand other KEY WORDS

Obj i


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Comparative Advantage

Explain the law of comparative

advantage

Understand the gains from

specialization and exchange.

Objectives

K T


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absolute advantagelaw of comparative advantage

specialization

bartermoney

division of labor

Key Terms

C ti Ad t


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Absolute advantage being able to

do something using fewerresources than other producersrequire

Law of comparative advantage the

worker with the lower opportunitycost of producing a particularoutput should specialize in thatoutput

S i li ti


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Specialization

Specialization when individual workers

focus on single tasksGains from specialization

More efficient and productive

Absolute advantage focuses on who used

the fewest resources, comparativeadvantage focuses on what else thoseresources could have produced

ExchangeBarter system of exchange in which

products are traded directly for otherproducts

Money medium of exchange


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Specialization

Most people consume little of whatthey produce and produce little of

what they consume!Division of labor sorts the

production process into tasks to becarried out by separate workers

K T


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absolute advantagelaw of comparative advantage

specialization

bartermoney

division of labor

Key Terms


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SO, WHY IS THEPPF CURVE

SHOWN AS ABOWED OUT

SHAPE?


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Demonstrating

Increasing

Opportunity Costand

Constant

Opportunity Cost


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Building The Production Possibilities Frontier

So

da

Pizza

S

P

0

X

Y

Z

M

A Fully Labeled Production Possibilities Frontier:Th C Wh P l Diff t


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The Case When People are Different

S

P

So

da

Pizza0

X

Y

Z

M

Unemployment

Attainable

Unattainable

Figure 5


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So

da

Pizza0

Unemployment(just inside the curve)

Unattainable(outside the curve)

Attainable(on the curve and on the inside)

Figure 5

Figure 7Ill t ti I i O t it C t


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Illustrating Increasing Opportunity Cost

Production Possibilities Frontier

Pizza

S

od

a

0 1 2 3

1098

76543

21

Opportunity Cost of going from 0 unitsof Pizza to 1 unit of pizza

Opportunity Cost of going from1 unit of Pizza to 2 units of pizza

Opportunity Cost of goingfrom 2 units of Pizza to 3units of pizza

A Fully Labeled Production Possibilities Frontier:The Case When People are the Same


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The Case When People are the Same

S

P

So

da

Pizza0

X

Y

Z

M

Unemployment

Attainable

Unattainable

Figure 6


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So

da

Pizza0

Unattainable(outside the curve)

Attainable(on the curve and on the inside)

Unemployment(just inside the curve)

g

Figure 8Illustrating Constant Opportunity Cost


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Illustrating Constant Opportunity Cost

Production Possibilities Frontier

Pizza

So

da

0 1 2 3

9876

5432

1

Opportunity Cost of going from 0 units ofPizza to 1 unit of pizza

Opportunity Cost of going from 1unit of Pizza to 2 units of pizza

Opportunity Cost ofgoing from 2 units ofPizza to 3 units of

pizza


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Increasing and Constant Opportunity Cost


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Increasing and Constant Opportunity Cost

Increasing Opportunity CostExists when the additional resources required to

produce an additional unit grows as moreoutput is produced.

Likely to occur when people are different in theirskills.

Constant Opportunity CostExists when the additional resources required to

produce an additional unit remains the sameas more output is produced.

Likely to occur when people are identical in theirskills.


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Final Ppp on Ppf