Ppf corn and rice
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A simple PPT for showing Increasing Opportunity Costs
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Ppf corn and rice
- 1. Here is a farm. Each box represents 1 acre of land to farm on. There are a total of 100 acres. 100 ACRES
- 2. Corn Rice Half of the land, as divided by the BLACK line, is suitable for growing Corn and half is suitable for growing Rice.
- 3. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corn Rice At harvest time on each acre of land suitable for growing Corn I can get 100 bushels of Corn. One each acre of land suitable for growing Rice I can get 100 ____ of Rice
- 4. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corn Rice Now assume the market conditions have changed and the price per bushel of corn is now significantly higher than the price of a ____of Rice. I want to grow more Corn because it will give me more revenue per acre planted.
- 5. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corn Rice In order to do that I will have to GIVE UP some of my Rice production. If the land for growing Rice was PERFECTLY SUITABLE for growing Corn, then I would have to give up only 1 acre of Rice production in order to get one additional acre of Corn production. 100___of Rice given up to get 100 bushels of Corn. CORN!CORN!CORN!CORN!CORN!CORN!
- 6. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corn Rice Let’s keep going!! If I want more Corn then I just take an equal amount in Rice production. The farmers Opportunity Cost of producing 100 additional bushels of Corn is 100 ___of rice. An equal proportional Trade-off. CORN!CORN!CORN!CORN!CORN!CORN! CORN!CORN!CORN!
- 7. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corn Rice If farming were this simple… The conditions for growing corn and rice are very different. Corn requires fertile and only moist soil. Rice required VERY wet conditions that would drown corn plants. In order to get more corn it will be more costly in terms of what we have to give up in terms of Rice production.
- 8. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corn Rice Because the land resource used to produce Rice is not perfectly suitable for growing Corn, it will take more Rice acreage to produce the equivalent in Corn production. In other words, it might take 2 acres of land right next to the corn field to get 100 bushels of Corn. So, now to get 100 additional bushels of Corn we have to GIVE UP 200 of Rice (2 acres worth of Rice) CORN!CORN!CORN! CORN!CORN!CORN!
- 9. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corn Rice How about another round of additional Corn production? Some of those first acres of Rice field were close to the corn field. Now we are wading DEEPER into the Rice field. The next 100 Bushels of Corn are going to be even more expensive in terms of what we have to give up in Rice production. 100 more bushels of Corn will require 3 acres of land suitable for Rice. So, we have to GIVE UP 300 ___ of Rice in order to get the additional 100 bushels of Corn. CORN!CORN!CORN! CORN!CORN!CORN! CORN!CORN!CORN! CORN!CORN!CORN! CORN!CORN!CORN!
- 10. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corn Rice The increasing amount of Rice (200 then 300) we have to give up in order to get an equal amount of additional Corn (100 bushels) represents the important concept of “INCREASING OPPORTUNITY COSTS”. When we try to convert one resource that is easily adaptable for producing one good (Rice) but not readily adaptable for the production of another (Corn) , it will be increasingly more costly to do so in terms of the resource you are trying to convert. CORN!CORN!CORN! CORN!CORN!CORN! CORN!CORN!CORN! CORN!CORN!CORN! CORN!CORN!CORN!