1. Opening activity

Take out a food item e.g. a chocolate bar or a piece of fruit.  Have the students brainstorm what was necessary to make the product.

Now review and discuss their response answers and explain that the aim of the lesson is to learn what goes into making products, something that economists call the 'factors of production.'

Have your class label a page in their notebooks with this title, before watching the following short video.  While watching the video your classes can label each of the factors of productions identified in the video.

Activities: Production possibility frontiers (PPF / PPC)

The diagram to the left is sometimes called a production possibility curve (PPC) and illustrates a graphical representation of scarcity.  A PPC curve shows the maximum combinations of goods and services that an economy can produce. This presumes that all the resources in the economy are being used efficiently and the supply of technology is fixed. This can also be referred to as maximum or potential output.

The economy pictured above has sufficient resources (factors of production) to produce either capital goods or consumption goods.

(1) What combination of capital and consumer goods can this economy produce?

 (b) Which combination of goods are currently unavailable to the economy, given its current production factors?

Activity 2

Examine the following powerpoint which then includes a discussion question on the last slide.  Factors of production

Activity 3

Several countries have vast resources of certain factors of production. For instance some of the gulf states have vast oil wealth. This is an example of a region of the world well endowed with the production factor land.  A number of Asian countries e.g. Vietnam and China have achieved rapid economic growth thanks to an abundance of cheap, relatively skilled labour while America, Japan and Northern European countries enjoy a capital advantage over many other parts of the world.

Research the following countries - Taiwan, Canada, Qatar, Switzerland, Chile, South Africa, Turkey.  With which factor of production is each country well endowed?

Activity 4

(a) A number of countries have enjoyed considerable wealth based on products extracted from the land e.g. oil, gas and mineral resources.  How might those nations struggle to maintain their standard of living once those natural resources are diminished?

(b) Explain the likely correlation between investment by governments in human capital - education and training and growth in the economy?

(c) Does money in the bank count as 'capital'

Activity 5

Use what you have learnt about factors of production to explain differences in living standards between different nations with seemingly similar natural and geographical advantages.  Which factor of production do you think is the most important in terms of the development of different nations?

Activity 6: Reflection

Draw a PPF diagram for your nation, labelling the two axis.  Draw the point on the PPF diagram which you think represents the current economic position of the country where you are based?  Consider the number of unemployed people, land, empty office space e.t.c. present in the economy before providing your response.

7. Video activity

Watch the following short video before completing the activity which follows:

Production possibility frontier game

This game was created for Economics students at Swansea University and introduces the concepts of opportunity cost and production possibility frontier curves.  In this game involves your students will create their own PPF curves.

Running the Game

We start the game with an imaginary economy, IB land which produces just two goods – manufactured goods (coloured paper balls) & agricultural goods (white paper balls). The workers are represented by the students in the room.

The two sets of paper balls are placed into separate containers in the middle of the room.  Each container should be labelled 'Raw materials'.  You will also place two empty containers (for finished goods) at each end of the room.  Your workers will produce a unit of either manufactured or agricultural goods when a ball is moved from the raw material container to one of the finished good containers. The students must stand in a “production” line and pass the ball along the line. Each student must hold every ball but can only hold one ball at a time. The containers need to be a fair distance apart and each student should be far enough apart so that they can only just reach to pass the balls to each other.

Production takes place in sessions with each session consisting of 30 seconds of production time.  Initially all of the workers should produce just one of the goods, before gradually moving to the other production line.  Once a session is completed, return all the balls to their original containers and plot the output from each session to create your PPF curve.

Variations

This game should be run for a number of sessions, with the results plotted against the original PPF curve. If the class contains sufficient numbers then more workers can be added to the chain, which should have the effect of shifting the PPF curve outwards.  Alternatively students may handle more than one ball at a time, representing the impact of an increase in training on the production possibility frontier.

Suggested homework activity(s)

1. Use a production possibility frontier (PPF) diagram to explain the relationship between factors of production, economic goods and opportunity cost?  [10 marks]

2. Use a production possibility frontier (PPF) diagram  to explain the difference between a movement along a production possibility frontier (PPF) and an outward shift?  [10 marks]

Available as a handouts at:

Homework activity 1

Homework activity 2

The mark schemes for both activities are available at: Guidance for answering the homework question