Production Curves

Glossary
TERM DEFINITION
all the renewable and nonrenewable natural resources used in the production
land
process
labor the physical and mental efforts contributed by humans in the production process
capital the buildings, equipment, and human skills used to produce goods and services
entrepreneurship the act of starting a business by bringing together all the other factors of production
factor of production a resource used to produce goods and services
the skills, knowledge, and experience possessed by people that adds value to
human capital
their jobs
physical capital all the things required by businesses to produce goods and services from raw materials

production possibilities curve (PPC) a graph showing the total possible amount of goods and services that can be produced with limited available resources

efficiency using limited resources to maximize production of goods and services

underutilization using resources below their maximum efficiency
any combination of possible outputs that lies outside the PPC curve; the point at which there are not enough resources to produce
unattainable point
a simple PPC depicting all the possible combinations of defense goods and
guns versus butter
consumer goods produced in an economy

Objective categorize resources into factors of production and use production possibilities curves
In this lesson, you will to interpret the scarcity of resources.

Factors of Production
resources
All countries have different ________________________ in varying quantities at their disposal.

labor entrepreneurship
land _______________ capital ____________________________
producing
When a country or a business uses a particular resource for __________________ a good, less of that resource
goods
is available to make other _____________. It is essential for an economy to decide which production
activity allocate
________________ will make maximum use of that resource and ________________the resource accordingly.

Name the Resource

Do you consider the resources that went into making the supplies you are using right this minute?
resources produce
Think about the ___________________ needed to __________________ the goods and services we use.

Copyright © 2019 Edmentum Inc. All Rights Reserved.

 What Are Factors of Production?
basic economy
These factors of production are the _______________ requirements of an __________________to produce
goods and services.

What Are Factors of Production?

primary
Land is the __________________ factor of production in any production process.
all
In economics, land includes __________ natural resources: minerals,
vegetation
_______________________, trees, and wildlife. That includes everything that is
underwater
_________________________, the water itself, and the air above.
renewable
It also includes all _______________________ natural resources, such as solar
wind
energy, biomass, and ____________, as well as nonrenewable natural resources, such as
coal
______________ and crude oil.

effort
Labor is the human ________________ in any production process. Labor is the
physical laborers
______________________ efforts of factory workers, ______________________, and
mental
farmhands. Labor is also the _________________ effort used for transforming raw
products
materials into final ___________________.

production
Capital is human-made resources used in a _________________________ process.
skills
Human capital includes all the talent, knowledge and ________________ that
goods
individuals use to produce ________________ and services.
objects
Physical capital includes all the human-made ___________________ used in the
tools
production process, such as buildings, _______________, and equipment.

three
An entrepreneur is a person who combines the other ________________ factors of
produce
production to ___________________ new goods and services.
invent business
They _________________ products or ideas and develop _____________________
and are the ones who face risk and uncertainty while conducting business.

Copyright © 2019 Edmentum Inc. All Rights Reserved.

 (see “Sample Answer” for ideas)
Categorize the Resources according to Factors of Production. Note that there are three (3) of the factors
already listed.
Factors of Production Resources

Labor designers

Capital engineering knowledge

Labor engineers

Capital machines on which phones are produced

land oil

Capital production knowledge

labor production workers

Labor salespeople

Entrepreneurship the company founder's ability to create the company and market the phone

Land the mineral copper

Land the mineral tungsten

capital trucks and airplanes

Land wood pulp for making packaging

The Production Possibilities Curve

scarce
Resources are __________________, and it is essential to use them
efficiency produce
_______________________. Often, we have to _____________________
good
less of one good just to produce more of another _______________ using
the available resources.

Copyright © 2019 Edmentum Inc. All Rights Reserved.

 limited
Because of the ___________________ nature of resources, every
trade offs
society must consider scarcity, ______________ - ___________, and
producing
opportunity costs when ______________________ goods and
PPC
services. The production possibilities curve (_________) represents
opportunity
these trade-offs and _________________________ costs.
graph
A PPC is a _______________ that represents the possible
combinations
__________________________ of two goods that are producible
using the available scarce resources.

Allocative Efficiency
maximizes
An efficient economy _____________________ the use of all
Available scarce resources. The PPC depicts the different points
efficiency
of______________________ in an economy.
At each point on the PPC, the economy cannot produce
additional
_______________________ units of one good without producing
fewer
__________________ of the other.
For example, at point A, the country can produce 4,000 pens and
1,300 computers. Similarly, at point B, the country can producee
3,000 pens and 2,000 computers.

At any point on the PPC, it is it is not possible for the economy to produce more computers without
reducing the number of pens or to produce more pens without reducing the number of computers. Points A
all points efficiency
and B and __________ the other points on the curve are ______________ of ___________________.

Copyright © 2019 Edmentum Inc. All Rights Reserved.

 fails
When an economy ________________ to use its
unattainable maximum
Point D indicates: __________________ resources to ________________________
efficiency, it leads to underutilization. The
under
points _______________ the PPC reflect this
underutilization.

outside
underutilization All points that lie __________________ the PPC are
Point C indicates: ____________________ unattainable
unattainable. An ________________________ point
output
reflects a combined ________________ of goods
that isn’t possible with a limited set of resources.

PPC and Economic Growth

limited
Every economy faces the constraint of ___________________ Right shift
produced Economy growing
resources and that total output _____________________
Increase in output
depends on the availability of resources. But if there’s an
increase or a decrease in the availability of
resources shifts
_____________________, the PPC ________________.

Left shift
Economy shrinking
Decrease in output

Guns Versus Butter

combinations
The main purpose of the PPC is to show which __________________________ of two goods an economy can
produce
____________________ with a limited amount of resources.
To better understand this idea, let’s consider a popular model: guns versus butter. Guns represent
military consumer
____________________ goods while butter represents _____________________ goods. Every country must
balance
have a ___________________ between military goods (guns) and consumer goods (butter).

Copyright © 2019 Edmentum Inc. All Rights Reserved.

 Remember that all the points on the PPC represent an
efficient
______________________ way of producing two goods. When a
country
increases
 _____________________ the production of one good, the
production of the other good automatically
decreases
 ______________________.

Calculating the Opportunity Cost

opportunity
The PPC also depicts the ________________________ cost
good
of one good in terms of other ________________.
value
Opportunity cost is the _______________ of the units
addition
of a good given up to get __________________ units of
another good.
cost
On the PPC, we can see opportunity ____________ in terms
point
of how a _______________ moves on the curve.
The shift from Point A to Point B indicates that the number
increases
of pizzas __________________ one unit while the number of
decreases
hotdogs ____________________ two units.

Resources and Disease production

social
Economics is a __________________ science that deals with the _______________________ and
scarce
consumption habits of individuals dealing with _________________ resources. But economic concepts such as
production possibilities
factors of _______________________ and the production _____________________ curve are not limited to
the subject of economics.
issues
Economic knowledge applies to ________________ that any
society
___________________ might face.

Copyright © 2019 Edmentum Inc. All Rights Reserved.

Summary
Explain how the four (4) factors of production impact the possibilities production curve (PPC) and a country’s
resources.

The four factors of production are land, labor, capital, and entrepreneurship. These factors have a significant
impact on the production possibilities curve and a country's resources.

The production possibilities curve represents the maximum output of two goods that an economy can produce
with its available resources and technology. The curve shows the trade-offs that a society must make between
two goods when using its scarce resources to produce them. The position and shape of the production
possibilities curve are influenced by the four factors of production.

Land: Land refers to all natural resources, including minerals, forests, water, and fertile soil. The availability of
land affects a country's ability to produce goods and services. For example, if a country has abundant fertile
land, it can produce more agricultural goods. This, in turn, can shift the production possibilities curve outward,
indicating an increase in the country's ability to produce both goods.

Labor: Labor refers to the human effort that is used to produce goods and services. The quality and quantity of
labor available in a country can impact the country's production possibilities curve. For example, if a country
has a highly skilled and educated workforce, it can produce more complex goods and services, which can shift
the production possibilities curve outward.

Capital: Capital refers to the tools, equipment, and machinery that are used to produce goods and services.
The availability of capital can affect a country's ability to produce goods and services efficiently. For example, if
a country has advanced technology and machinery, it can produce goods and services faster and more
efficiently. This can shift the production possibilities curve outward.

Entrepreneurship: Entrepreneurship refers to the ability to organize and manage resources to produce goods
and services. The entrepreneurial spirit of a country's people can impact the country's production possibilities
curve. For example, if a country has a culture that encourages innovation and risk-taking, it can lead to the
creation of new goods and services, which can shift the production possibilities curve outward.

In summary, the four factors of production play a significant role in shaping a country's production possibilities
curve. The availability and quality of land, labor, capital, and entrepreneurship impact a country's ability to
produce goods and services efficiently. A country with abundant resources and a highly skilled and innovative
workforce can produce more goods and services and shift its production possibilities curve outward, leading to
economic growth and development.

Copyright © 2019 Edmentum Inc. All Rights Reserved.