Introduction Part 2

1. Introduction Part 2 Production Possibilities Positive vs Normative Statements

2. Production Possibilities • The maximum amount of two products that can be produced using all available resources efficiently.

3. Production Possibilities • The maximum amount of two products that can be produced using all available resources efficiently.

4. Production-Possibilities Curve • By plotting all the points onto a graph and connecting the points we create a line called the production-possibilities curve. • The curve shows all the possible combinations of corn and spears that can be produced

5. Production-Possibilities Curve Point G: Inefficient Point F: Unattainable Points A – E: Efficient

6. Movement in the PPC • Technological Advance

7. Movement in the PPC • Economic growth

8. Production-Possibilities Curve • Opportunity Cost • To produce more spears, a certain amount of corn has to be sacrificed. • Opportunity cost of x spears = amount of corn to be “sacrificed” • The opportunity cost can be found by finding the slope of the line.

9. Production-Possibilities Schedule

10. Positive vs Normative Statements • Positive statements are statements that describe the world as it is. • Called descriptive analysis • Normative statements express a judgment about whether a situation is desirable or undesirable. • Called prescriptive analysis

11. Positive or Normative? • "The moon is made of green cheese" • "The world would be a better place if the moon were made of green cheese"