00:01
Okay, i think the point of this question is to understand everything that goes on with a production possibilities frontier.
00:11
So we do this in two dimensions.
00:17
We talk about an economy with just two goods, the cell column x and y, just to illustrate these concepts.
00:25
So what we want to do is draw the combinations, all the combinations of efficient use of goods x and y.
00:35
So if we dedicated all the resources to just making y, let's say we could make at most this amount of y.
00:44
And if we started to want to make x, then we would have to give up some resources to make some x.
00:50
And in doing so we would be decreasing the amount of y we could get as we increase the amount of x.
00:58
And we generally draw this relationship with this bowed shape, because what it reflects is that as we specialize more and more of just making one good, the trade -off, the amount of y that you have to give up to make these last x's is a lot.
01:28
There's a lot of y just to make a little bit of x.
01:31
So it emphasizes that as we specialize in one thing, the resources get less and less efficient.
01:42
So the shape of this curve, and same thing with y, if we were making an awful lot of y, the amount of x that is required to make just a little bit more y is larger.
01:58
So that's the explanation for the shape of the curve.
02:05
And any point on this curve represents full utilization of resources.
02:11
So they're all the combinations of x and y, and we're using all of our resources...