This session we will learn about the concept of scarcity, the idea that societies and people have a limited ability to produce the things we want but an unlimited desire to consume those things. I will introduce the production possibilities model as our theoretical framework for this. You should have read the text chapter identified below in the homework section and watched the related videos. This page contains all the information you need for today's class. Use the table of contents on the right to help you navigate. Click here to download a PowerPoint presentation on this topic.
First half hour: What are the effects of forcing all people of one race into one form of production? Your teacher will lecture on this session's concepts and that question after showing this video.
Second half hour: Do today's problem of the day (below).
Additional resources: If you need more explanation here are some additional resources you can use.
Read Krugman (Modules 1 and 3)
Watch these videos:
Khan Academy
Imagine a society that produces capital goods and consumer goods.
Draw a production possibilities frontier for capital goods and consumer goods. Using the concept of opportunity cost, explain why it most likely has a bowed-out shape.
Show a point that is impossible for the economy to achieve. Show a point that is possible to achieve but inefficient.
Identify a point that is productively effiicient and explain why it is productively efficient.
Define allocative efficiency. Identify a point that might be allocatively efficient and explain what must be true for this to be an allocatively efficient outcome.
Identify a point on the production possibilities curve that would be representative of a country that allocates more resources to capital goods than consumer goods. On the diagram illustrate the economic growth that will result from this choice and explain why a country that uses its resources for consumer goods instead of capital goods would experience less growth.