Hey hi dude econ students. This is mr. Clifford. Welcome to ACDC econ. Right now we're gonna talk about how the production possibilities curve ships
you my students, so it's important for you to get used to the idea of things shifting and econ we're explaining concepts and then we put those concepts to numbers those numbers on a graph and then usually we shift the graph
you're going to see it, in micro and macroeconomics and it all starts with the production possibilities curve
we've established that any point inside the curve is inefficient because we could produce more of each good and any point on the curve is efis
we know that a point outside the curve is impossible or not attainable given our current resources, but what if we get more resources
that's right. the production possibilities curve can shift
you must use them there's two things that shift the production possibly is occurred a change in the quantity or quality of resources or a change in technology.
for example in nineteen twenty there's a certain number of cars and corn that we could produce.
but now we can produce way more than we did before that point right there that was once impossible is now possible
this is because we have new and better resources and because we have better technology
there's one more option that can shift the curve which is the idea of trade
now when countries specialize in trade they can get other products at a lower opportunity cost and that they produce to themselves that means the production possibilities curve would shift out in the amount that they can consume
it doesn't mean that they can produce more than they could before, but they can get more than them before because of trade
now you learn a whole lot more about this and you learn about something called comparative advantage
make sure to watch this video
it's going to help you out
now let's get back to shifting the production possibilities curve
I'm going to give you four examples and I want you to figure out what happens to the production possibilities curve for consumer goods and capital goods
now a quick reminder. consumer goods are made for direct consumption like pizza, capital goods are made for indirect consumption
so it's like an oven so capital goods are tools and machinery to produce consumer goods
for each one of these scenarios draw separate production possibilities curve and show it happens in each one of the situation's number one what if we have faster computers and better technology
for number two whatever country's power plants were destroyed and so it had a decreased electricity to produce
so number three what if there was an increase in the number of people who are unemployed and there was in the economy
and number four what if there's an increase in education make sure to pause this video
and I'll go over the answers for number one if we have new computers and better technology the entire production possibilities curve will shift outward we can produce more consumer goods and more capital goods
for number two a destruction of power plants would mean we have less resources in this case electricity which is super important for an economy and that would cause a production possibilities curve to shift inward we produce less consumer goods and we can produce less capital goods and that's exactly what happened to Japan when there was the earthquake and the tsunami combination right here which was efficient became impossible because the resources were destroyed
now let's compare that to number three when we have a recession a bunch of unemployed workers that would not be a shift in the curve right the curve does not shift inward because the workers are still a lot
now if the workers die that would mean we don't have a resource the entire curve woul shift inward but the workers are alive
they're just not being used that means
it's a point inside the curve
remember a point in the curve is inefficient or it's unemployment of our resources
so workers who are unemployed is a point in the curve not a shift in the curve
okay and for number four the last one an improvement in education would result in a shift outward of the curve
remember this is not more workers it's better workers the quality of workers increased
this is the idea of human capital if our workers are better trained and more intelligent that would cause us to be able to produce more stuff
to help you understand this concept go ahead and watch the third episode of my series econ movies
I use the movie monsters ink to explain the production possibilities curve okay
I hope this video helps make sure to subscribe and if you want to learn more about unit 1 concepts
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