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ModuleThe ProductionPossibilities Curve Model
KRUGMAN'SMACROECONOMICS for AP*
3
Margaret Ray and David Anderson
What you will learnWhat you will learn
in thisin this ModuleModule::• The importance of trade-offs in
economic analysis
• What the production possibilities curve model tells us about efficiency opportunity cost, and economic growth
• The two sources of economic growth - increases in the availability of resources and improvements in technology
The Production Possibilities The Production Possibilities CurveCurve
Opportunity Cost - ConstantOpportunity Cost - Constant
Opportunity Cost - IncreasingOpportunity Cost - Increasing
Economic GrowthEconomic Growth
• Economic growth
• Expansion of the economy’s production possibilities
• Availability of resources (land, labor, capital, entrepreneurship)
• Technology
Economic GrowthEconomic Growth
Figure 3.1 The Production Possibilities CurveRay and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 3.2 Increasing Opportunity CostRay and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 3.3 Economic GrowthRay and Anderson: Krugman’s Economics for AP, First Edition
Copyright © 2011 by Worth Publishers
