Production possibilities frontier
Production Possibilities Frontier Tradeoffs for a hunter gatherer and the production possibilities frontier. Ceteris Paribus
Production Possibilities Frontier
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- Let's say you're some type of a hunter gatherer,
- and you're trying to figure out
- how much of your time you should spend hunting
- and how much of your time to spend gathering.
- So let's think about the different scenarios here
- and the tradeoffs that they involve.
- And just for simplicity we're going to assume that
- when you're talking about hunting,
- the only animal around you to hunt for are these little rabbits.
- And when we talk about gathering,
- the only thing you can gather are some types of berries,
- that will keep our conversation a little bit simpler.
- So, let's think about all of the scenarios.
- So, first let's call this first scenario scenario A.
- And let's say, so let's call this the number of rabbits.
- And then let's call this the number of berries.
- Let's do this column the number of berries you can get.
- So, if you were to spend the entire day going after rabbits,
- all of your free time, out of making sure you have time to sleep
- and get dressed and all those types of things,
- let's say you can actually get 5 rabbits on average on a given day.
- But, if you spend all of your time getting rabbits,
- you're not going to have any time to get berries,
- so you are going to be able to get zero berries.
- Now, let's say that you were to
- only try to allocate a little more time to get berries,
- and a little less time to get rabbits.
- So we'll call that scenario B.
- We will call scenario B the reality
- where you have enough time to get four rabbits on average,
- and when you do that, all of a sudden,
- you are able to get 100 berries.
- And when we do the different scenarios,
- we're assuming that everything else is equal.
- You're not changing the amount of time you have either hunting or gathering.
- You're not changing the amount of sleep,
- you're not changing your techniques for hunting rabbits or hunting berries,
- you're not somehow looking to do other things with your time.
- So all other things are equal.
- And the general term for this - it sounds very fancy
- if you were to say it in a conversation -
- is ceteris paribus,
- which literally means, so anytime someone says
- "Oh, and, you know, ceteris paribus, we assume this variable changes,"
- or whatever else, they're saying we're assuming
- everything else is being held equal.
- So, ceteris means "all other things."
- You're probably familiar with "et cetera".
- It's the same word, essentially, "other things". And paribus, "equal".
- So you're not, when you're going from scenario A to scenario B,
- you're not changing the amount of time you're sleeping,
- you're not changing somehow
- the geography where you are in a dramatic way.
- You're not changing the tools you use, or the technology.
- Everything else is equal.
- The only variable you are changing is
- how much time you allocate to finding rabbits
- versus finding berries.
- So let's do some more scenarios,
- assuming ceteris paribus.
- So let me do scenario C.
- You could, on average, have enough time to get 3 rabbits,
- but if you get 3 rabbits
- then all of a sudden, you will only be able to get,
- or you will be able to get, or if you are only getting 3 rabbits
- you're now going to be able to get 180 berries
- and let's do a couple more.
- I'm going to do two more scenarios.
- So let's say scenario D.
- If you reduce the amount of time you spend getting rabbits
- so you get 2 rabbits, now all of a sudden,
- you have enough time, on average, to get 240 berries,
- and then let's say you spend even less time hunting for rabbits,
- on average,
- then you have even more time for berries,
- and so you're able to get 280 berries.
- And I'll do one more scenario, here.
- So let's say scenario F. Let's call these scenarios.
- Scenarios A through F.
- So scenario F is [when] you spend all your time looking for berries,
- in which case, on average,
- you're going to be able to get 300 berries a day.
- But since you have no time for rabbits,
- you aren't going to get any rabbits.
- So what I want to do is plot these,
- and on one axis, I'll have the number of rabbits,
- and on the other axis I'll have the number of berries.
- - So let me do this right over here -
- So this axis, I will call this my rabbit axis, and start at zero
- this will be 1, 2, 3, 4, and that will be 5 rabbits.
- And then on this axis,
- I will do the berries.
- So this right over here, let's make this 100 berries,
- this is 200 berries,
- and then this is 300 berries.
- And so this is my berries axis.
- Now, let's plot these points, these different scenarios.
- So, first we have scenario A -
- maybe I should have done all these columns
- in that same scenario A color.
- Scenario A, 5 rabbits, 0 berries.
- We are right over there. That is scenario A.
- Scenario B, 4 rabbits, 100 berries. That's right over there.
- That's 100 berries. So, that is scenario B.
- Scenario C. 3 rabbits, 180 berries. Let's see, this would be 150,
- 180 would be like right over there.
- So, if you have time for 3 rabbits,
- you have time for about 180 berries, on average,
- So this is scenario C.
- And then scenario D, we have in white.
- If you have time for 2 rabbits,
- you have time for 240 berries. So that is right around there.
- So, this is scenario D. So this would be 250,
- so 240 is a little bit lower than that,
- so it will be right over there. That is scenario D.
- Scenario E, if you have time for 1 rabbit,
- you have time for 280 berries.
- That gets us right about there.
- That is scenario E. And then finally, scenario F,
- you are spending all of your time looking for berries,
- you have no time for rabbits,
- So all of your time for berries, no time for rabbits.
- Zero rabbits, 300 berries. That's right over there.
- This is scenario F.
- So what [do] all of these points represent?
- These are all points, and this is going to be a fancy word,
- but it's a very simple idea.
- These are all points on you as a hunter-gatherer,
- on your production possibilities frontier.
- Because if we draw a line -
- I just arbitrarily picked these scenarios,
- although I guess you could on average,
- get 4.5 rabbits on average, or, on average, get 3.5 rabbits,
- and then have a different number of berries -
- So these are all points on the different combinations
- between the trade-offs of rabbits and berries.
- Let me connect all of these,
- Let me connect them in a colour I haven't used yet.
- So let me connect them.
- And what you see, it should just be one curve.
- I'll draw them as a dotted line.
- It's easier for me to draw a dotted curve than a straight curve.
- So this right over here, this curve right over here, represents
- all the possible possibilities of combinations of rabbits and berries.
- I've only picked certain [ones] of them
- but you could have a scenario right over here
- maybe we could call that scenario G,
- where on average, the amount of time you've allocated,
- on average you would get 4.5 rabbits,
- so on some days you'd get 4 rabbits,
- and every other day you'd get 5 rabbits
- so maybe it averages out to 4.5 rabbits.
- And then maybe it looks like
- you'd get about 50 berries, in that situation.
- So all of these are possibilities.
- You don't have to just jump from 4 rabbits to 5 rabbits,
- or maybe, you know, you are spending,
- maybe in this scenario, you're spending 7 hours,
- and in this scenario you spend 8 hours,
- but you could spend 7 hours and a minute
- or 7 hours and a second, so anything in between is possible,
- and all of those possibilities are on this curve.
- So these 5 scenarios,
- actually these 6 scenarios that we've talked about so far,
- these are just, scenarios on this curve,
- and that curve, we call, once again fancy term, simple idea,
- our production possibilities frontier.
- Because it shows all of the different possibilties we can do, we can get.
- 3 rabbits and 180 berries,
- 2 rabbits and 240 berries.
- What we cannot do is something that's beyond this.
- So for example, we can't get scenario like this:
- So this right over here would be impossible.
- So this right over here is impossible.
- This point over here, where I'm getting 5 rabbits and 200 berries.
- If I'm getting 5 rabbits,
- I'm spending all my time getting rabbits,
- I have no time for berries. Or, another way to think of it,
- if I'm getting 200 berries,
- I don't have enough time to get 5 rabbits.
- So this point is impossible. This point would be impossible.
- Any point that's on this side of the curve is impossible.
- Now, any point on this side of the curve,
- you can kind of view it as inside the curve,
- or below the curve, or to the left of the curve.
- All of these points, right over here are possible.
- These points, for example,
- it is very easy for me to get 1 rabbit, and 200 berries.
- So that right over there, is possible.
- Now, is that optimal? No!
- Because if I were to really work properly,
- I could get many more berries, or I could get more rabbits
- for if I have 200 berries, I could get more rabbits,
- or if I'm concerned, if I only want 1 rabbit,
- I can get more berries, so this is possible.
- All of the points down here are possible,
- but they aren't optimal. They are not efficient.
- So the points in here,
- we'll just say that they are not efficient.
- Maybe somehow I'm not using my resources optimally
- to do this type of thing when I'm over here.
- Or maybe I'm just not being optimally focused,
- or whatever it might be.
- If you're talking about a factory setting,
- when you're talking about deciding to make one thing or another,
- then maybe you just aren't using the resources in an optimal way.
- Now, all the points on the frontier - these are efficient.
- You're doing the most you can do.
- Right now we're not making any judgement between whether
- any of these possibilties are better than any other possibility.
- All we are saying is that
- you are doing the most that you can do.
- Any of these things you are making the most use of your time.
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