Production Possibilities Curve- Macro Topic 1.2 (Micro Topic 1.3)

Summary

In this educational video, Jacob Clifford introduces viewers to the concept of the production possibilities curve through an interactive drawing game. Participants draw squares and triangles within a time limit, illustrating scarcity and the trade-offs between goods. The video explains the curve's significance in economics, including efficiency, opportunity cost, and the law of increasing opportunity cost. It also touches on how improved resources or technology can shift the curve, leading to economic growth. The video concludes with a call to action for viewers to practice these concepts and offers a free resource for further learning.

Takeaways

• 😀 The video introduces an economics game where participants draw shapes within a time limit, illustrating the concept of scarcity and efficiency.
• ✏️ Participants are challenged to draw squares with their non-dominant hand, emphasizing the impact of resource allocation on production.
• 📊 The production possibilities curve (PPC) is introduced as a tool to visualize the trade-offs between two goods, showing the limits of production due to scarcity.
• 🔄 The concept of opportunity cost is explained through the game, highlighting the idea that choosing one option means giving up another.
• 📉 The video demonstrates the law of increasing opportunity cost, using the analogy of picking cherries versus playing video games to show how opportunity costs can change.
• 📈 The script explains how the PPC can shift outward due to increased productivity, better resources, or technological advancements, representing economic growth.
• 🛠️ The video uses a 'double pencil' as a memory device to symbolize productivity and economic growth, reinforcing the idea that improvements in these areas can expand the PPC.
• 💡 The importance of understanding and calculating opportunity cost is stressed, as it is a fundamental skill in economics for making informed decisions.
• 📚 The video promotes an educational resource called the 'ultimate review packet' for further study and practice of economic concepts, including the PPC.
• 🎓 The script concludes with a call to action for viewers to like, subscribe, and participate in a pop quiz to test their understanding of the video's content.

Q & A

What is the main activity Jacob asks viewers to participate in at the beginning of the video?

Jacob asks viewers to draw as many squares as they can in ten seconds using their non-dominant hand.

What is the purpose of the drawing activity in the video?

The purpose of the drawing activity is to illustrate the concept of production possibilities and opportunity cost in economics.

What does the production possibilities curve (PPC) represent?

The production possibilities curve represents the different combinations of goods that can be produced with available resources, given a certain level of technology and full employment of resources.

Why can't Jacob produce 15 squares and 10 triangles simultaneously according to the PPC?

Jacob cannot produce 15 squares and 10 triangles simultaneously because such a combination is outside the PPC, indicating it is unattainable with the current resources and technology.

What does a point inside the PPC signify?

A point inside the PPC signifies inefficiency, as it represents a scenario where resources are not being fully utilized.

What is the concept of opportunity cost explained in the video?

Opportunity cost is the value of the next best alternative that is foregone when making a decision. In the video, it is demonstrated by the number of squares Jacob has to give up to produce additional triangles.

How does the law of increasing opportunity cost apply to the example of picking cherries?

The law of increasing opportunity cost applies to picking cherries as the easier cherries are picked first, and as one moves to higher branches, the opportunity cost of picking each additional basket of cherries increases.

What does a bowed-out shape of the PPC indicate?

A bowed-out shape of the PPC indicates that the opportunity cost is not constant; it increases as one moves from producing one good to producing more of another.

What does a shift in the PPC represent?

A shift in the PPC represents an increase in productivity, which could be due to more resources, better resources, or improved technology, allowing for the production of more output.

How can the PPC be applied to the overall economy?

The PPC can be applied to the overall economy by showing combinations inside the curve as representing unemployment, points on the curve as full employment, and points outside the curve as potential growth areas.

What resource does Jacob offer to help viewers practice and review economic concepts?

Jacob offers 'The Ultimate Review Packet' which includes study guides, exclusive videos, and worksheets to help practice and review macro and microeconomics.

Outlines

00:00

📊 Introduction to Production Possibilities Curve

Jacob Clifford introduces an economics game where participants draw squares and triangles within a time limit using their non-dominant hand to illustrate the concept of scarcity and efficiency. He explains the production possibilities curve (PPC), which shows the different combinations of goods that can be produced given limited resources. The video emphasizes the idea of opportunity cost, which is the cost of the next best alternative forgone. The opportunity cost is constant in this example, as producing one more triangle always results in giving up three squares. The video also introduces the Ultimate Review Packet as a resource for practicing and reviewing economics concepts.

05:00

🔄 Shifts in the Production Possibilities Curve

The second paragraph delves into how the PPC can shift outward, indicating increased productivity and economic growth. This shift can occur due to additional resources, improved technology, or better human capital. The video explains that points inside the PPC represent inefficiency, such as unemployment, while points on the curve represent full employment and efficiency. Points outside the curve are unattainable with current resources. The video concludes with a call to action for viewers to like and subscribe, and it introduces a pop quiz to reinforce learning. The host also provides a memory device for the concept, suggesting viewers associate the PPC with a hat and a double pencil as visual aids.

Keywords

💡Economics Game

The 'Economics Game' refers to the interactive activity Jacob Clifford initiates to illustrate economic concepts through drawing squares and triangles within a time limit. It's a fun and engaging way to introduce viewers to economic principles, such as scarcity and trade-offs, in a relatable and visual manner.

💡Scarcity

Scarcity is a fundamental economic concept that refers to the limited availability of resources relative to the unlimited wants and needs of society. In the video, scarcity is demonstrated by the inability to produce an unlimited number of squares and triangles within the given time, hence showing that choices must be made due to limited resources.

💡Production Possibilities Curve (PPC)

The Production Possibilities Curve is a graph that shows the different combinations of goods that can be produced with a given amount of resources. In the video, the PPC is used to visualize the trade-offs between producing squares and triangles, highlighting the concept that producing more of one good means producing less of another due to scarcity.

💡Efficiency

Efficiency in economics means using resources in the best way possible to achieve the most output. The video explains that points on the PPC represent efficient production, where all resources are being fully utilized without waste, unlike points inside the curve which represent underutilization and inefficiency.

💡Trade-offs

Trade-offs are the choices made between two alternatives given limited resources. The video uses the example of choosing between producing squares or triangles to explain that increasing production of one good comes at the expense of the other, thus highlighting the necessity of making trade-offs.

💡Opportunity Cost

Opportunity cost is the benefit an individual, investor, or business misses out on when choosing one alternative over another. It is the cost of the next best alternative that is foregone. In the video, the opportunity cost is illustrated by the number of squares Jacob gives up to produce additional triangles.

💡Law of Increasing Opportunity Cost

The Law of Increasing Opportunity Cost states that as more of one good is produced, the opportunity cost of producing more of it increases. The video uses the analogy of picking cherries to explain this concept, where the easier cherries are picked first, and as one moves to harder-to-reach cherries, the opportunity cost of picking additional cherries increases.

💡Resources

Resources in economics include all inputs used in the production of goods and services, such as labor, capital, and land. The video discusses how having more or better resources can shift the PPC outward, indicating an increase in productive capacity and economic growth.

💡Full Employment

Full employment refers to a situation where all available labor resources are being used efficiently. In the context of the video, points on the PPC represent full employment, where all resources are being utilized to their maximum potential without waste.

💡Economic Growth

Economic growth is the increase in the production capacity of an economy over time. The video explains how economic growth can occur through the acquisition of more resources, better resources, or improved technology, which allows for a shift in the PPC to produce more output.

💡Ultimate Review Packet

The 'Ultimate Review Packet' mentioned in the video is a resource designed to help viewers practice and review economic concepts. It includes study guides, videos, and worksheets, and is offered as a free resource to assist in learning and understanding economics more deeply.

Highlights

Introduction of an economics game involving drawing squares and triangles within a time limit.

Emphasis on using the non-dominant hand to illustrate the concept of scarcity.

Explanation of production possibilities through the number of shapes drawn.

Introduction of the production possibilities curve in economic theory.

Discussion on the concept of efficiency and the inability to produce outside the curve.

Illustration of the idea that points inside the curve represent inefficiency.

Explanation of trade-offs in resource allocation.

Introduction to the concept of opportunity cost in economic decisions.

Calculation of opportunity cost using the example of squares and triangles.

Introduction of the law of increasing opportunity cost.

Example of picking cherries and playing video games to explain increasing opportunity cost.

Importance of calculating opportunity cost when making economic choices.

Discussion on how the production possibilities curve can shift due to increased resources or technology.

Application of the production possibilities curve to the overall economy.

Mention of the Ultimate Review Packet as a resource for practicing economic concepts.

Memory devices introduced to help remember the production possibilities curve and economic growth.

Encouragement for viewers to like, subscribe, and participate in a pop quiz.

Transcripts

hey Internet this is Jacob Clifford now

it's time to play an economics game not

believe if James you're $200 you landed

on his property

no he's in jail I'm not gonna give money

to a criminal no actually this one's

more of a race so go grab a pencil and a

paper or when I say go I want you to

draw as many squares as you possibly can

in ten seconds and I'll tell you when to

start and with a stop but there's a

catch here you've got to use your right

hand even if you're left-handed you got

to use your right hand so I'll give you

a few seconds to get ready so on your

marks get set go

[Music]

stop well done great job now this time

you're doing the same thing over again

except switch to your left hand even if

you're right-handed you're doing this

left-handed and you're drawing as many

triangles as you can in ten seconds on

your marks get set go

[Music]

stop great job all right now let's see

if you actually beat me I got 15 squares

and only five triangles and some of

those triangles are really rough these

numbers give you your production

possibilities the amount of squares and

triangles you can produce in 10 seconds

and you can use these numbers to draw

the very first graphs that you learn in

an econ class the production

possibilities curve illustrates a lot of

the key concepts that you learn in

economics for example notice that I

can't produce 15 squares and 10

triangles all at the same time I can't

produce any combination that's outside

the curve why well because of scarcity

any combination on the graph is possible

and it shows the idea of efficiency

because I'm using all of my resources to

the fullest now imagine instead I

produce one square and only one triangle

now obviously I'm under utilizing my

resources the pencil and my time is

being wasted so any point inside the

curve is inefficient because I'm not

using all of my resources and the graph

also shows the idea of trade-offs when

you produce triangles you can't also at

the same time produce squares right when

you produce one means you can't produce

the other one again because of scarcity

now there's a skill here that you

absolutely have to be able to do and

practice it's calculating opportunity

cost now this goes one step further than

the idea of trade-offs opportunity cost

is the specific number of squares that

you give up when you produce a certain

number of triangles in my case I gained

five triangles but it cost me 15 squares

so each one triangle cost me 3 squares

now if I put all my time in producing

squares then I have to give up the five

triangles so each one square cost me one

third of a triangle that's my

opportunity cost my example is a little

easier because there's only two

combinations and I'm assuming the

opportunity cost is constant that means

every single time I produce a triangle

I'm going to give up another three

squares so another triangle give up

three squares another triangle give up

another three squares you see constant

opportunity cost by calculating

opportunity cost gets a lot harder when

the curve has a different shape for

example when it's boat out like this

this graph shows the idea of the law of

increasing opportunity cost which is a

lot easier to explain given a different

examples let's use playing video games

and picking cherries

when you

pick cherries you don't start the top of

the tree and try to get the hardest ones

to reach you start with the easy ones

the low-hanging fruit you grab those

really quick and then move on to the

next level and keep doing that over and

over again until finally eventually you

get to the ones that on the very top

they're super hard to reach notice that

the opportunity cost of each basket of

cherries that you pick is not constant

it gets bigger and bigger now on the

graph here's the combination that you're

producing if all you're doing is playing

video games when you go pick some

cherries that first basket is super

quick and easy to fill and you still

have plenty of time to play a lot of

video games

the opportunity cost from picking that

first basket is really low if you pick

another basket of cherries it's gonna

cost more time so now you have even more

video games that you have to give up the

opportunity cost is a little bigger and

this keeps happening over and over again

until that last basket of cherries and

you're spending all your time trying to

get those cherries and fill that basket

so you have no time for video games

notice increasing opportunity cost but

the most important thing is you have to

be able to calculate the opportunity

cost when you're moving between

different combinations in the graph if

you see a straight line that's constant

opportunity cost and opportunity cost is

the same a bowed out curve means the

opportunity cost is different and in

both cases it all depends if you're

moving up the curve or down the curve

this is a skill that you have to

practice and the good news is I have a

resource that's gonna help you do just

that it's gonna help you practice and

the best thing is it's free to start

right now it's called the ultimate

review packet and includes study guides

exclusive videos and worksheets to help

you practice and review macro and

microeconomics the unit 1 study guide is

waiting for you right now and it's free

it's in the link in the description

below but we're not done with the PPC

quick review combinations inside the

curve are inefficient on the curve our

efficient outside the curve are

unattainable given our current resources

but what if we have more resources or

better resources or better technology

well in that case the production

possibilities curve can actually shift

notice that I still only have 10 seconds

but now I can produce more than I ever

did before this change in productivity

allows me to reach combinations that

were once impossible and again it's

because I have better resources or more

resources now this whole idea the

concepts and the graph can be applied to

the overall economy

combinations inside the curve show

unemployment because we're not using our

resources points on the curve show the

idea of full employment we're using all

of our resource to the fullest

we're being efficient and points outside

the curve show you cannot produce them

because they're beyond our current

resources but if we have more resources

like more physical capital like machines

tools and factories or if we have better

resources like more human capital where

there's workers who are more experienced

and knowledgeable and educated then we

can produce more output and have

economic growth over time so what is the

memory device for this episode what's

the widget that goes on the widget wall

well there's gonna be two of them one is

the hat that I used in the other video

that I made about the production

possibilities curve dye and the other

one is gonna be my cool double pencil

that shows the idea productivity and

economic growth when you see these I

want you to remember the production

possibilities curve drawing all those

triangles and squares and the idea that

the curve can shift but don't go

anywhere we still have two things to do

number one it's time for you to like

this video and subscribe also it's time

for a pop quiz

at the end of these videos I give you a

few practice multiple-choice questions

to make sure you're actually getting

keep in mind they're not going to be on

the screen for very long so you have to

pause the video and answer the questions

and look in the comments below for the

answer key as always thank you so much

for watching let me know how I can help

you learn and love economics until next

time

you