hey Internet this is Jacob Clifford now it's time to play an economics game not believe if James you're $200 you landed on his property no he's in jail I'm not gonna give money to a criminal no actually this one's more of a race so go grab a pencil and a paper or when I say go I want you to draw as many squares as you possibly can in ten seconds and I'll tell you when to start and with a stop but there's a catch here you've got to use your right hand even if you're left-handed you got to use your right hand so I'll give you a few seconds to get ready so on your marks get set go [Music] stop well done great job now this time you're doing the same thing over again except switch to your left hand even if you're right-handed you're doing this left-handed and you're drawing as many triangles as you can in ten seconds on your marks get set go [Music] stop great job all right now let's see if you actually beat me I got 15 squares and only five triangles and some of those triangles are really rough these numbers give you your production possibilities the amount of squares and triangles you can produce in 10 seconds and you can use these numbers to draw the very first graphs that you learn in an econ class the production possibilities curve illustrates a lot of the key concepts that you learn in economics for example notice that I can't produce 15 squares and 10 triangles all at the same time I can't produce any combination that's outside the curve why well because of scarcity any combination on the graph is possible and it shows the idea of efficiency because I'm using all of my resources to the fullest now imagine instead I produce one square and only one triangle now obviously I'm under utilizing my resources the pencil and my time is being wasted so any point inside the curve is inefficient because I'm not using all of my resources and the graph also shows the idea of trade-offs when you produce triangles you can't also at the same time produce squares right when you produce one means you can't produce the other one again because of scarcity now there's a skill here that you absolutely have to be able to do and practice it's calculating opportunity cost now this goes one step further than the idea of trade-offs opportunity cost is the specific number of squares that you give up when you produce a certain number of triangles in my case I gained five triangles but it cost me 15 squares so each one triangle cost me 3 squares now if I put all my time in producing squares then I have to give up the five triangles so each one square cost me one third of a triangle that's my opportunity cost my example is a little easier because there's only two combinations and I'm assuming the opportunity cost is constant that means every single time I produce a triangle I'm going to give up another three squares so another triangle give up three squares another triangle give up another three squares you see constant opportunity cost by calculating opportunity cost gets a lot harder when the curve has a different shape for example when it's boat out like this this graph shows the idea of the law of increasing opportunity cost which is a lot easier to explain given a different examples let's use playing video games and picking cherries when you pick cherries you don't start the top of the tree and try to get the hardest ones to reach you start with the easy ones the low-hanging fruit you grab those really quick and then move on to the next level and keep doing that over and over again until finally eventually you get to the ones that on the very top they're super hard to reach notice that the opportunity cost of each basket of cherries that you pick is not constant it gets bigger and bigger now on the graph here's the combination that you're producing if all you're doing is playing video games when you go pick some cherries that first basket is super quick and easy to fill and you still have plenty of time to play a lot of video games the opportunity cost from picking that first basket is really low if you pick another basket of cherries it's gonna cost more time so now you have even more video games that you have to give up the opportunity cost is a little bigger and this keeps happening over and over again until that last basket of cherries and you're spending all your time trying to get those cherries and fill that basket so you have no time for video games notice increasing opportunity cost but the most important thing is you have to be able to calculate the opportunity cost when you're moving between different combinations in the graph if you see a straight line that's constant opportunity cost and opportunity cost is the same a bowed out curve means the opportunity cost is different and in both cases it all depends if you're moving up the curve or down the curve this is a skill that you have to practice and the good news is I have a resource that's gonna help you do just that it's gonna help you practice and the best thing is it's free to start right now it's called the ultimate review packet and includes study guides exclusive videos and worksheets to help you practice and review macro and microeconomics the unit 1 study guide is waiting for you right now and it's free it's in the link in the description below but we're not done with the PPC quick review combinations inside the curve are inefficient on the curve our efficient outside the curve are unattainable given our current resources but what if we have more resources or better resources or better technology well in that case the production possibilities curve can actually shift notice that I still only have 10 seconds but now I can produce more than I ever did before this change in productivity allows me to reach combinations that were once impossible and again it's because I have better resources or more resources now this whole idea the concepts and the graph can be applied to the overall economy combinations inside the curve show unemployment because we're not using our resources points on the curve show the idea of full employment we're using all of our resource to the fullest we're being efficient and points outside the curve show you cannot produce them because they're beyond our current resources but if we have more resources like more physical capital like machines tools and factories or if we have better resources like more human capital where there's workers who are more experienced and knowledgeable and educated then we can produce more output and have economic growth over time so what is the memory device for this episode what's the widget that goes on the widget wall well there's gonna be two of them one is the hat that I used in the other video that I made about the production possibilities curve dye and the other one is gonna be my cool double pencil that shows the idea productivity and economic growth when you see these I want you to remember the production possibilities curve drawing all those triangles and squares and the idea that the curve can shift but don't go anywhere we still have two things to do number one it's time for you to like this video and subscribe also it's time for a pop quiz at the end of these videos I give you a few practice multiple-choice questions to make sure you're actually getting keep in mind they're not going to be on the screen for very long so you have to pause the video and answer the questions and look in the comments below for the answer key as always thank you so much for watching let me know how I can help you learn and love economics until next time you