Eco 155: Principles of Macroeconomics Class 5
Summary
TLDRThis script delves into the concept of the production possibilities curve, illustrating the trade-offs an economy must make due to limited resources. It explains the importance of full employment and production, defining efficiency and opportunity costs. The discussion highlights the law of increasing opportunity cost, showing how the cost of producing more of one good rises as resources become less interchangeable. The script also touches on how changes in resources, technology, and social structures can shift the curve, reflecting on real-world implications with examples like the situation in Syria.
Takeaways
- π The script discusses the concept of the production possibilities curve, which illustrates the trade-offs an economy faces when allocating limited resources to produce different goods and services.
- π It emphasizes the importance of understanding scarcity and the idea that resources cannot create goods and services out of thin air, hence the need to prioritize and choose wisely.
- πΌ The terms 'full employment' and 'full production' are defined, with the former meaning all resources are being used and the latter indicating resources are used where they have the greatest effect on output.
- π± An example is given to show comparative advantage, like growing oranges in Florida instead of northern Canada, to highlight the efficiency of using resources where they are most effective.
- βοΈ Assumptions of the production possibilities curve include an economy operating efficiently with fixed resources in quantity and quality, and a fixed level of technology.
- π The script explains that the production possibilities curve represents all possible production outcomes given the constraints, showing an infinite number of choices rather than just a few discrete options.
- π The concept of opportunity cost is introduced, demonstrating that as more of one good is produced, the cost in terms of the other good increases, illustrating the law of increasing opportunity cost.
- π The script uses the law of increasing opportunity cost to explain why it's not possible to have more of everything, as resources are not perfect substitutes and the cost of reallocating them increases.
- π It also discusses how changes in the quantity or quality of resources, technology, or the legal/social structure can shift the production possibilities curve outward (expansion) or inward (contraction).
- π The importance of a strong legal and social structure for efficient production is highlighted, as corruption or a lack of work ethic can diminish the production possibilities of an economy.
- π The script concludes with real-world examples, such as the situation in Syria, to illustrate how conflict and instability can drastically reduce a country's production capabilities.
Q & A
What is the main concept discussed in the video script?
-The main concept discussed in the video script is the production possibilities curve, which illustrates the different combinations of goods that can be produced given limited resources and a fixed level of technology.
What does the term 'full employment' mean in the context of the script?
-In the context of the script, 'full employment' means utilizing all available resources, ensuring that there are no idle resources or unemployed people who want to work.
What is the definition of 'full production' as mentioned in the script?
-'Full production' is defined as using resources in a way that they have the greatest effect on output, producing goods and services where there is a comparative advantage.
What are the assumptions made when drawing a production possibilities curve?
-The assumptions made when drawing a production possibilities curve include the economy operating efficiently with full employment and full production, fixed quantity and quality of resources, and a fixed level of technology.
Why is it not possible to have both more education and more healthcare without opportunity costs?
-It is not possible to have both more education and more healthcare without opportunity costs because resources are limited, and increasing one area typically means decreasing another due to the law of increasing opportunity cost.
What is the law of increasing opportunity cost?
-The law of increasing opportunity cost states that as more units of a good are produced, the opportunity cost of producing additional units of that good increases because resources are not perfect substitutes for one another.
How does the quality of resources affect the production possibilities curve?
-The quality of resources affects the production possibilities curve by influencing the efficiency and effectiveness with which goods and services can be produced. Higher quality resources can lead to a shift outward in the curve, indicating increased production capabilities.
What impact does technology have on the production possibilities curve?
-Technology impacts the production possibilities curve by determining the knowledge and methods available to turn resources into goods and services. Advances in technology can shift the curve outward, indicating that more can be produced with the same resources.
How can changes in legal and social structures affect production possibilities?
-Changes in legal and social structures can affect production possibilities by influencing the stability and predictability of economic activities. A strong legal framework and positive social structures can enhance production, while corruption or social unrest can diminish it.
What happens to the production possibilities curve when there is a war or conflict?
-During a war or conflict, the production possibilities curve may shift inward due to the loss of resources, destruction of capital, decline in the quality of resources, and the breakdown of legal and social structures, leading to reduced production capabilities.
Can a country produce more of both goods simultaneously without any changes in resources, technology, or social structures?
-No, a country cannot produce more of both goods simultaneously without changes in resources, technology, or social structures due to the constraints of the production possibilities curve and the law of increasing opportunity cost.
Outlines
π Introduction to Production Possibilities Curve
The script introduces the concept of a production possibilities curve, which is a model used to understand the allocation of limited resources to produce goods and services. It emphasizes the scarcity of resources and the resulting limitation on production. The video aims to explore methodologies to address this scarcity, defining terms like 'full employment' and 'full production'. Full employment refers to utilizing all available resources, while full production is about using these resources where they have the greatest effect on output, often in areas of comparative advantage.
π Assumptions of the Production Possibilities Curve
This paragraph outlines the assumptions underlying the production possibilities curve model. The economy is assumed to operate efficiently, with full employment and production, meaning all resources are actively contributing to output. Resources are considered fixed in both quantity and quality, and technology is also fixed. The assumptions provide a snapshot of an economy at a given moment, acknowledging that these factors can change over time, affecting the shape and position of the production possibilities curve.
ππ Trade-offs and the Shape of the Production Possibilities Curve
The script uses the example of choosing between producing pizzas and textbooks to illustrate the concept of trade-offs. It explains that if all resources are dedicated to one product, none can be allocated to the other. The graph of these choices forms the production possibilities curve, which represents all possible combinations of two goods that can be produced efficiently. The curve shows the trade-offs involved in producing more of one good at the expense of the other, highlighting the infinite number of choices along the curve.
π Inefficiency and Impossibility in Production
This section discusses the concepts of efficiency and possibility in the context of the production possibilities curve. Points inside the curve represent inefficient production, while points outside the curve are impossible given the current level of resources, technology, and other factors. The script emphasizes that all points on the curve are efficient and possible, but there is no single 'best' point, as preference for a particular point is subjective and normative.
π Opportunity Cost and the Law of Increasing Opportunity Cost
The script explains the concept of opportunity cost as it relates to the production possibilities curve. Opportunity cost is the value of the next best alternative given up when making a choice. The law of increasing opportunity cost states that as more of one good is produced, the opportunity cost of producing additional units of that good increases. This is due to the fact that resources are not perfect substitutes for one another, leading to diminishing returns as resources are reallocated from one production process to another.
π οΈ Factors Influencing Production Possibilities
This paragraph delves into the factors that can shift the production possibilities curve, such as changes in the quantity or quality of resources, advancements in technology, and the legal and social structure of a society. It provides examples of how these factors can either expand or contract the curve, thereby affecting the potential output of an economy. The script also touches on the importance of a strong work ethic and the rule of law in maintaining an efficient and productive economy.
π Real-World Implications of Production Possibilities
The script concludes by applying the concept of the production possibilities curve to real-world scenarios. It uses the example of Kobani, Syria, to illustrate how conflict and social upheaval can diminish the production possibilities of a region. The destruction of infrastructure, loss of human capital, and the breakdown of legal and social structures all contribute to a reduction in the quantity and quality of resources available for production, shifting the curve inward and limiting the potential output of goods and services.
Mindmap
Keywords
π‘Production Possibilities Curve
π‘Scarcity
π‘Full Employment
π‘Full Production
π‘Comparative Advantage
π‘Efficiency
π‘Opportunity Cost
π‘Law of Increasing Opportunity Cost
π‘Resources
π‘Technology
π‘Legal and Social Structure
Highlights
Introduction to the concept of the production possibilities curve (PPC) as a tool for understanding the allocation of scarce resources.
Explanation of the scarcity of resources and its impact on the limitation of goods and services production.
Definition of full employment and its distinction from overexploitation of resources or unethical labor practices.
Clarification of full production, emphasizing the efficient use of resources based on comparative advantage.
The analogy of growing oranges in northern Canada versus Florida to illustrate the concept of comparative advantage.
Assumptions underlying the PPC model, including efficient operation, fixed resources, and constant technology.
Graphical representation of the PPC with examples of different production choices for pizza and textbooks.
The infinite number of choices along the PPC and the concept of connecting these to form the curve.
Discussion on the subjective nature of choosing the best point on the PPC based on societal preferences.
Introduction of the opportunity cost concept and its role in decision-making along the PPC.
Illustration of the law of increasing opportunity cost with the trade-off between pizzas and textbooks.
Explanation of why resources are not perfect substitutes and the implications for opportunity costs.
The impact of changes in resources, technology, and social structures on the PPC.
Examples of how political promises of increased spending in multiple sectors can conflict with the PPC and opportunity costs.
Visual demonstration of the PPC shift using the example of Syria's production capabilities before and during conflict.
The importance of legal and social structures in maintaining an efficient production system.
Conclusion emphasizing the PPC as a snapshot of economic possibilities and the dynamic nature of resources and technology.
Transcripts
[Music]
okay so what we want to do is we want to
continue our discussion here and we want
to look at a completely different model
and that would be production
possibilities curve so we know let's go
back and review we know we have this
idea of our resources and we know that
we want to turn these guys into goods
and services and we know that those
resources are limited in scarce
therefore we know that the goods and
services themselves are going to be
limited in scarce because we can't
create these goods and services out of
thin air so in essence we're gonna have
this problem and if we if there's some
amount of resources here that are not
being used whatever this fraction is
right it's this fraction here not used
is it obvious that this guy is going to
be a little bit smaller all right not
created is that obvious if we don't have
it we have resources that are not being
used there's gonna be stuff that's not
being made right because we can't make
goods and services out of thin air we're
not God we have to have resources to
make those goods and services the
problem is is that even if we do get and
wind up and use all of these guys we're
still gonna have a limited amount of
goods and services to produce that's
just what there is so what we want to
know is we want to know what type of
methods or methodologies or whatever can
we use to kind of understand this
problem in a little bit more detail now
what we're going to do is we're going to
use something called the production
possibilities curve
hi now before we start looking at this
guy we need to define a few terms so we
need to find full employment and we need
to find full production so full
employment means we're going to be using
all of these resources okay it does not
mean that we're over exploiting the
environment or that you're using child
labor or something like that right
here's your set of resources we want to
use them all we don't want resources
sitting idle it doesn't make sense to
have people unemployed that want to work
it doesn't make sense to build factories
and have them sit there right so we want
to use all of these available resources
full production is this idea we want to
use these resources where they will have
the greatest effect on output
now we'll define this guy as essentially
using our u resources producing with the
good and services they have a
comparative advantage in will define
what we mean by compare to advantage a
little bit later on but we can kind of
conceptualize what this guy means right
now and let's look at it like this
we've got oranges that we want to grow
and the question is can we grow these
guys in northern Canada can we grow
oranges in northern Canada not easily
because we could do it what would we
have to have a green house right you
could grow oranges in North Canada and
you might even use full employment of
all of your resources to try to make
that happen right it might take a whole
lot of more resources to try to grow
oranges in North Canada in fact it does
take a whole lot more resources to try
to try to grow oranges in northern
Canada but then it does in Florida so we
might have full employment but that's
not full production right that's not
using those resources we're gonna have
the greatest effect on output right in
other words it's much easier to grow
oranges in Florida where they naturally
want to grow and like northern Canada
grow wheat Wow
so we have this idea of our full
employment in full production right so
let's look at some assumptions here
economy is operating efficiently right
now what we mean by this is that we have
full employment and full production
we're producing the goods and services
that we have a comparative advantage in
we have the resources are not sitting
idle right people have jobs factories
are being used we don't have stuff just
sitting around doing nothing our
resources are fixed in quantity
Wow so we have our factors of production
which is another name for our resources
our factors of production are fixed in
quantity right the labor force isn't
growing or shrinking the amount of
capital is not increasing or decreasing
lands not increasing or decreasing etc
our factors of production are fixed in
quality right so our labor force isn't
becoming more educated or less educated
capitals not increasing or decreasing in
quality etc
technology is fixed alright so what do
we mean by technology when you hear the
word technology what do you think of
yeah computers right generally what
people say but that's not in essence
what we mean right what we mean by
technology is our knowledge of how to
turn resources into goods and services
we kind of saw that last time on the
video right where we had people that
we're taking different types of
chemicals and turning them into
something completely different right or
people were combining this stuff to
create something else or people are
using all of these different things to
create brand new products right
none of that stuff necessarily needed
computers per se so we have these four
assumptions here else have two goods
pizza and textbooks we have these
assumptions here we've got two goods
pizza and textbooks and in essence what
we're saying is that well our economy is
operating efficiently in other words
we're using all of our resources we're
using we're gonna have the greatest
effect on output our factors of
production are fixed and quantity and
quality and our level of technology is
fixed now do we typically see this the
labor force doesn't change at all the
labor force is in getting more educated
or less educated and our knowledge of
how to turn stuff into goods and
services doesn't changing at all do we
see that no all right so we can think of
this as a snapshot
because over time we know that these
guys are changing alright so we're just
looking at a snapshot for right now
we'll change these assumptions here in a
few minutes so let's look at our choices
so we're gonna have textbooks up here we
have pizza here
and if we devote all of our resources to
making textbooks we can make 10
textbooks and if we have all of our
resources making textbooks how many
pizzas can we make zero all right if we
devote all of our resources to making
pizza we can make four pizzas and if we
have all of our resources being devoted
to pizza how many textbooks can we make
zero so here are five of our different
choices right we've got ten textbooks
and one pizza nine books or strike that
10 textbooks and zero pizzas nine
textbooks one pizzas 7 and 2 4 and 3 0
and 4 right and we can look at these on
a graph so we're gonna put pizza over
here no particular reason
we'll put books over here blessing okay
and we've got these little sets of
choices here alright so here's 10 I'll
call this guy a here was annoying and he
was he looks it here
call this guy be it was 7 I'll put him
out here see I'll call him D
three two one all right so here's our
five different choices plotted on a
graph all right now are there really
only five different choices No can you
make half a pizza yeah right
I get half homeworks half quizzes half
tests all the time right you can Colt
you can totally make half a pizza you
can totally make half a textbook right
so we don't actually have five different
choices how many choices do we actually
have an infinite number of choices right
very good and when we connect all of
those infinite number of choices
together we get the production
possibilities curve all right
because this curve shows all the
different possible production
alternatives
given these set of choices over here
right given the set of choices that we
are operating efficiently our factors of
production are fixed in quantity our
factors of production are fixed in
quality and our technology is fixed now
which point is best what did you say so
you got this one right here so what's
your name
Mary Mary says D is best what do you
think well so which one would you choose
so she chooses C what's your name
Courtney Cu okay who's right is it C or
is it deep we're gonna have an election
do we want seven textbooks in two pizzas
or do we want four books and three
pizzas any of these points on the curve
is just as good as any other point there
isn't any best point per se on the curve
right which point you want to be at a B
C D or E which one's best quote unquote
is a normative issue but we can look at
a couple of other points we can look at
say point F
and point G and I'm going to make point
F right here so point F is for books and
one pizza so let's look at this guy for
a second for books and one pizzas he
possible yeah because it's possible when
we're making one pizza to make as many
as nine books what do we have to do to
make four books instead of nine yeah
just be inefficient just be lazy that's
all you got to do not have people work
all right so we see that this guy is
possible but not efficient let's look at
Point G point G I'm gonna stick out here
so Point G here is seven books
and three pizzas what's true about this
guy it's not possible it's not a matter
of working harder it's a matter we can't
do that we do not have either the
quantity or the quality or the level of
technology to make point G he is not
possible so this guy point G here not
possible so if we're comparing the guys
on the line to the guys inside the guys
on the line are better than the guys
inside
that's not normative that's positive the
guy outside here being better than the
guys on the line that's true all right
that's not a pause I mean that's not a
normative issue that's a positive issue
but as to which point we want to be on
the line that's a normative issue so we
can say that the points on the line are
superior they're better than the points
inside we can't say that points outside
are better than points on the line we
can't say which point on the line we
want to be yet that we can't say that's
I mean you can say that that's what we
have to do but you can't say B is better
than deep right that's that value is
subjective sort of thing that we talked
about earlier you can't objectively
measure about you cannot say D is
clearly superior to B because it's not
depends on people's preferences okay
let's look at something here
let's assume we're at Point a and we
move to point B what do we gain very
good so we're gonna gain a pizza what do
we lose one book very good all right so
we have an opportunity cost here I'm
just gonna brief ate opportunity cost Oh
see we have an opportunity cost here in
one book let's go from point B to Point
C what do we gain very good
what's its opportunity costs very good
everyone see that so when we go from
point A to point B we're gonna gain a
book we're gonna lose I mean strike that
we gained a pizza we're gonna lose a
book right so here is that opportunity
cost for our first pizza all right
here's the opportunity cost for our
second pizza right I mean in essence
you're just going to hear here's what
you had to gain the second time let's go
from Point C to point D
what do we gain I already started
writing it what do we gain one pizza
what's the opportunity costs three books
and you can actually measure the size of
that let's see we've used will use green
this time here all right
this green guy larger the red guy good
guy large and the blue guy let's go from
point D to point eat blessing what do we
gain one pizza what do we lose what's
its opportunity cost
and you can actually measure that here
we'll do it with this guy right here and
black so let's think very very carefully
about what's happening here is we make
more and more pizzas what's happening to
the opportunity cost of another pizza
it's getting bigger right we call this
the law of increasing opportunity cost
and what this law of increasing
opportunity cost says is that as you
make more and more units of a good the
opportunity cost of making more
increases hence the name increasing
opportunity costs so as we try to make
more and more pizzas the opportunity
cost we're gonna have to give up in
terms of books is going to go up right
and we can see that they're the first
pizzas only cost us one book the second
pizza though cost us two books the third
pizza cost us three books the fourth
pizza cost us four books
why
why does the opportunity cost increase
well why would the opportunity costs not
to stay the same be constant every
single time you want another pizza it'll
cost you a book that's it right there
resources are not perfect substitutes
for each other
so let's think very very carefully about
what this guy's says
what does it take to make pizza what do
you need dough sauce cheese toppings
would you say in the oven
for us
pan this Pizza gonna assemble itself
labor
Yatta Yatta Yatta Yatta right bubble a
little digital you got an idea what it
takes to make a pizza you've all seen
pizza before you know what it is it's
not that complicated
what does it take to make textbooks
paper ink glue printer press printing
press slash binding mm-hmm a writer /
editor yadda yadda yadda yadda yadda
yadda yadda right so you know what it
takes to make a book does our economy
contain all of these resources yes
because we can make textbooks and pizzas
therefore we have to have a printing
press and a binding machine and an oven
you have to because we know that we can
make textbooks and pizzas now let's
think very very carefully about this so
here we are we're making all textbooks
and we say I don't want to make all
textbooks I want to make some pizzas how
much does that contribute to textbook
production very little right when I was
in college
our landlord our oven was gas the heat
in the house was electric he paid the
gas bill we paid the electric bill so
what we would do on cold days in
Northeast Missouri we would crank up the
oven to 500 degrees
open the door stick a fan in front of it
in and blows free heat out right so we
could use the oven the heat
part of the place where we're printing
right it doesn't have zero value but it
doesn't have a whole lot of value right
so as we're here at a we're releasing
and we're moving to B we're releasing
resources and we're going to release the
resources that are really really good at
making pizzas well that's gonna be the
oven and the sauce which we were using
to lubricate the binding machine alright
well we found something about or we
found you know three and one oil or
whatever so we're releasing these
resources that are really good at making
pizzas but they're not very good at
making ovens and because they weren't
real they're not really good at making
books because they weren't really good
at making books book production doesn't
fall by that much it only falls by one
and then as we get farther and farther
down this guy as we go from like D to e
now we're trying to take all of these
resources over here that are really
really really really good at making
books and not that great at making
pizzas and try to get them to make
pizzas I sense they're really good at
making books book production falls by a
whole lot and since they're not that
great at making pizzas pizza production
doesn't go up by that much right so
these resources are not perfect
substitutes for each other and because
of that we have this law of increasing
opportunity cost is we try to make more
and more more of some good the
opportunity cost is going to increase
and you can see this
here right
here's education here's healthcare
and I'm gonna just to show you that this
isn't a contrived example and I'm not
this doesn't show increasing opportunity
cost because I drew it trickily all
right I'm gonna make these old guys the
same
okay so here's four units of education
here's three units of education there's
two units of education here's one unit
of education health care can be anything
up here your health care alright so here
you are at some point it can be any
point that you want it to be right as we
go from making all health care to making
education all right we've got one unit
of education here here is the
opportunity cost there's what it cost us
in terms of health care that's how much
health care we had to lose right and we
want to make another unit of education
all we did was double this guy that guy
in green is clearly larger than the guy
in red and all we want to do is increase
it again one more unit that guy in blue
is clearly larger than the guy in green
right and then once again right going
from I'll use I guess I'll use blonde
and then we have this guy down here
right
so if we're at this point right here oh
it could be anywhere we're here and the
politician says we're gonna have more
education and more health care because
that's what they say is that going to be
possible no right if you want more
health care that's fine
but this guy actually has to decrease
not increase right and the same thing if
you're here alright if you're here and
you say we're gonna have more education
and more healthcare I mean that's fine
but this guy has to go down right I mean
and you can see it I mean I'm a I'm a
perfect example right I mean my name is
or my title
dr. Mitchell all right
do you want me operating on you know
right I am not that kind of doctor so
let's assume we live in a totalitarian
state where they say we don't want you
doing education anymore we're gonna put
you in the healthcare field okay it's
fine what can I do in the healthcare
field
be an administrator what else can I hand
a scalpel to the doctor
scope ooh can I do that stat all right I
can say stat all right I can clean up
after people after they've thrown up
from having surgery all right and all of
the other things that goes into a blah
blah blah blah blah but I can't operate
on people all right so if you take me
and I like to think that I have a
comparative advantage in education
if you switch me from education to
health care because I'm really really
good at education this guy goes down by
a whole lot but I'm not that good at
health care I don't really enjoy that
this guy goes up by a little bit all
right and so the total is you actually
kind of mean if you want more healthcare
that's fine you know so stick me in
where I'm gonna have the greatest effect
on health care I don't know where that's
gonna be but health care is going to go
up by a little bit education is going to
go down by a lot we're gonna have this
increasing opportunity cost is we want
to make more and more of some good
whatever that something is it doesn't
matter it's when a politician tells
you're gonna have both more education
both more health care we're gonna have
more national defense and everyone's
taxes are gonna get cut you know that's
not happening that can't be true
something has to go down right you have
to have this opportunity cost this is
the thing that people also don't
understand people don't understand why
we were here wherever this point is for
health care and then they said we want
more health care and that's fine you can
have more health care if you want you
can have all the health care you want I
could care less all right or you're here
wherever you're here and people say oh
we want more health care we want to go
this way that's fine but that health
care cost has to
increasing which is exactly what it's
been doing right I mean if you look at
2008 to today the total amount spent on
health care has been going up that's not
surprising the opportunity cost is going
up it's not going down because is you
want more of something the law of
increasing opportunity cost says getting
more units of something that's going to
have a larger and larger and larger
opportunity cost it's just the way that
it is and that's going to be true like
we said for education for whatever and
whatever it is that they're promising
you questions about this before we move
on right I mean it doesn't have to be
this it can be your economics test and
biology the more time you spend studying
for economics the less time you have to
spend studying for biology I don't need
to study more for biology that's fine
going this way that means less time to
study for economics increasing
opportunity costs so let's go back and
look at our assumptions right we said
our resources were fixed in quantity
our races our sources are fixed in
quality and our technology is fixed what
happens when these guys change because
these guys do change no texting in class
please thank you what happens when these
guys change exactly right
[Applause]
so let's look at the winter education
healthcare doesn't matter must do
something stupid
our production possibilities curve for
computers and beach balls so if we see a
change here and our level of resources
our quantity of resources or a change in
our quality of resources or our level of
technology remember technologies is
knowledge of how to turn resources into
goods and service that has nothing to do
with computers then we're gonna see this
production possibilities curve shift out
and there's one more kind of here I'm
going to call this legal slash social
structure all right these these social
constructs that we use to define society
are very very important right in other
words what we mean by these legal and
social structures is that when you have
I mean I kind of put this if there's no
rule of law it's very very difficult to
make contracts right and the contracts
don't have to be formalized contracts
where it's actually written out and
signed and notarized it can be a social
contract that you're making with other
people all right same thing here when
you have this kind of social structure
if there's if some country has a really
strong work ethic then giving these
conditions they're going to be able to
make more than a country that has a
social structure it doesn't have a
strong work ethic they're gonna have all
of these resources and quantity and
quality and levels of technology and
don't make less stuff right or if the
legal structure changes in such a way
that the rule of laws and followed
anymore and it's corrupt you're gonna
have less stuff being made it's just the
way that it is so we have these things
changing right our production
possibilities curve and essence is going
to shift out
right and so we have here you have like
this guy right here I'll call this guy
Point C or it's calling point X so here
we have C 1 and B 1 and thanks to this
increase in the quantity or quality of
resources has changed technology or our
legal and social structure changed such
such a way that we are actually able to
make more stuff what happens with b1 and
c1 what's what's true about X and what's
true about Y so before we have this
change what's true about X possible yeah
efficient yes what's true about why not
possible now we have this change now
what's true about x and y x is possible
and he is inefficient what's true about
why he's efficient all right and you can
actually see here that we've got like
say c2 b2 right it's possible for us to
make both more beachballs
and computers or we could do something
different right we could make the same
number of computers more beach balls we
could make the same number of beach
balls and more computers right or any
combination between we can make more
boats we can also have it's these guys
going down all right there's a possible
for our country to have the quantity of
its resources diminish yeah quality
totally technology
I guess sure I don't know how that works
but yeah legal and social structure for
the for the country become more corrupt
or people to stop working yeah yeah
because that was a that was a snapshot
that one was saying where do we want to
be do we want to be here or do we want
to be here we can change the quantity
and quality of resources in the long run
can we change it tomorrow President
Trump gets elected Trump didn't get
elected Hillary Clinton elected Bernie
Sanders getting elected George got
elected Fred
his name is George Fred that's his name
president Fred comes in and says okay
and in six months time we're gonna have
both more national defense spending and
more health care spending and more
education spending and we're going to
create more beachballs and computers is
that gonna be possible not over the long
term could you do it possibly so if
these guys are diminishing what's
happening to our production
possibilities curve here he's shifting
it so here we see this guy doing this
so here we've got what are we looking at
computers and beach balls c1v1 right now
this guy is shifting in so here's our
point X we had a decrease in our
quantity of resources
so what's true about X
he used to be what possible and
efficient now he's he's not possible
point Z used to be inefficient and
possible now point Z is efficient right
so if you want to see production
possibilities curve changing I mean you
can see that it's really easy
here is kobani Syria I don't have a
slide a studio where this city is
someplace in Syria all right
and you can get a sense of what it looks
like right there all right I don't know
I don't have the slightest idea of what
they make I don't know what they make
they make stuff whatever it is right you
got all these buildings there and homes
and stuff clearly they're making
something obvious right what's been
going on in Syria for a while killing
each other and blowing stuff up right
there's what it looks like today what
are they making now not much because
whatever was being made here whatever
that was can't be made anymore I mean
look at this there's no building here
that I can see in this picture that has
no damage to it so here's these
resources quantity of labor quantity of
capital right quality of labor quality
of capital and the quantity and quality
of diminished right people are dead the
smart people left a long time ago right
the quantity of labors gone down or the
quantity of capital has gone down the
quality of capital that's left has gone
down there still are the same levels of
technology I mean I doubt there how to
turn resources and good in the services
change unless of course all the smart
people left and then all the people left
are the dumb people
then maybe the level of technology has
gone down all right
and their legal and social structure
what type of social structure do you
have now it's non-existent right there's
no legal sir
hey you parked your car illegally I'm
gonna do X Y & Z what boom boom
you're dead there's no legal and social
structure there anymore
it's an arc so we've seen a diminishment
of their production possibilities curve
well pick it from here on Friday
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