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Producing more snowboards requires shifting resources out of ski production and thus producing fewer skis. The negative slope of the production possibilities curve reflects the scarcity of the plant’s capital and labor. Here, we have placed the number of pairs of skis produced per month on the vertical axis and the number of snowboards produced per month on the horizontal axis. Neither skis nor snowboards is an independent or a dependent variable in the production possibilities model we can assign either one to the vertical or to the horizontal axis. The curve is a downward-sloping straight line, indicating we have assumed that there is a linear, negative relationship between the production of the two goods. These values are plotted in a production possibilities curve for Plant 1. Combination A involves devoting the plant entirely to ski production combination C means shifting all of the plant’s resources to snowboard production combination B involves the production of both goods. The table in Figure 2.1 "A Production Possibilities Curve" gives three combinations of skis and snowboards that Plant 1 can produce each month. It can produce skis and snowboards simultaneously as well. When devoted solely to snowboards, it produces 100 snowboards per month. Suppose the first plant, Plant 1, can produce 200 pairs of skis per month when it produces only skis. We assume that the factors of production and technology available to each of the plants operated by Alpine Sports are unchanged. Ryder’s three plants as a miniature economy and analyze them using the production possibilities model. While even smaller than the second plant, the third was primarily designed for snowboard production but could also produce skis. Two years later she added a third plant in another town. She also modified the first plant so that it could produce both snowboards and skis. The second plant, while smaller than the first, was designed to produce snowboards as well as skis. She added a second plant in a nearby town. Ski sales grew, and she also saw demand for snowboards rising-particularly after snowboard competition events were included in the 2002 Winter Olympics in Salt Lake City. Christie Ryder began the business 15 years ago with a single ski production facility near Killington ski resort in central Vermont. To construct a production possibilities curve, we will begin with the case of a hypothetical firm, Alpine Sports, Inc., a specialized sports equipment manufacturer. In drawing the production possibilities curve, we shall assume that the economy can produce only two goods and that the quantities of factors of production and the technology available to the economy are fixed.Ĭonstructing a Production Possibilities Curve It illustrates the production possibilities model. is a graphical representation of the alternative combinations of goods and services an economy can produce. A production possibilities curve A graphical representation of the alternative combinations of goods and services an economy can produce. Understand specialization and its relationship to the production possibilities model and comparative advantage.Īn economy’s factors of production are scarce they cannot produce an unlimited quantity of goods and services.

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