Limber, maybe those rabbits like to hang out together,Īnd so that keeps on going. But then for that second rabbit, my opportunity cost is 80 berries. Up 100 berries, so my opportunity cost for thatįirst rabbit was 100 berries. I have to stretch, it takes me a lot of effort Now, that first rabbit, I had to train myself toīe able to get rabbits, I have to buy the tools, Rabbit, so we're gonna talk about a different scenario Decreasing opportunityĬost, and let's make sure that it makes sense, so weĬould go back to the scenario where we're doing nothingīut picking berries, and let's say that first Well you might guess that, well look, if this one is increasingĪnd I'm bowed out, then being bowed in would beĪ decreasing opportunity cost. Opportunity cost? Maybe you could imagine a scenario where every incremental rabbit I catch, I get better and betterĪt catching rabbits. The way, which of these would describe a decreasing Let me write that down, increasing, increasing, O.C. I'm giving up literally the low-hanging fruit in terms of berries, the one, they might be on the ground, just ready for me to pick up, and so, the important realization from this video is this bowed out shape right over here, this is describing an The really nimble rabbit, the really sly rabbit, and Is the most that I can hunt in a day, I'm gonna give up 100 berries 'cuz here, I'm going after Gonna give up 80 berries, 80 berries, and then last but not least, that fifth rabbit, which And it keeps going, then third rabbit, I'm going to give up 60 berries. So notice, my opportunityĬost has increased. Or when I hunt that next rabbit, I should say, then But let's say that second rabbit is a little bit harder toĬatch, and I'm not giving up the quite so hard to pick berries, and so when I pick that next, So notice, when I increase the rabbits by one, myīerries go down by 20, so my opportunity cost is 20īerries for that first rabbit. Rabbit, the opportunity cost, I pick 20 less berries, So I don't give up a lot in terms of berries, especiallyīecause I'm probably not, the berries I'm giving up are probably the ones that are hardest to pick. Just likes to hang out and play with my knives,Īnd so when I catch that, it's very easy to catch, Maybe I decide to go after that first rabbit that So there's a world where I'm eating all berries,Īnd I can get, I can pick 300 berries a day, but Increasing opportunity cost, and you might recognize Which one of these curves describes that? Well some of you might have already seen the video on KhanAcademy, on Rabbits, the opportunity cost in terms of berries is increasing. More in terms of berries? Or another way of thinking about it is, as I catch more and more Which one describes the scenario where for every extra rabbit I catch,Įvery incremental rabbit, I'm giving up more and It's bowed in to the origin, it's popping in in this direction. Here, it looks like it'sīowed out from the origin, it looks like it's popping Possibility curve, or our PPC, it looks like a straight line. Under what scenarios would you have these different shapes? Here, our production Videos, but the reason why I'm showing you three different curves is because these three different curves clearly have different shapes,Īnd we wanna think about why you would have and Here, which we've already talked about in other So we have three different possible production possibility curves for rabbits and berries Keep in mind, this is assuming the opportunity cost is constant. So put a point at (2, 114).Ĭontinue this process of adding 2 gallons/subtracting 6 lbs of candy until you reach the end, then connect them all. The opportunity cost of 2 gallons (or one hour of time) is 6 lbs of candy. Next, let's say we want to make 2 gallons of wine. (This means you are spending all of your time to make candy and no time will be allocated to wine.) Put a point here. So if you labelled the x-axis as gallons, start with 0 gallons of wine and 120 lbs of candy. Vice versa, you would be giving up 2 gallons of wine per hour that you choose to make candy. You are giving up 6 lbs of candy if you choose to make wine for one hour. Then label the other axis gallons of wine. I personally like having the large number in the y-axis, so I would label that lbs of candy. Now to draw the PPF, create the x and y-axis, like the ones in the video. 20 hours/2 gallons is 10 gallons of wine per day. First, let's figure out the total number of each you can produce.
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