We've seen this graph,

the production possibilities frontier,

and we've seen

why it's curved outwards.

We also need to think about

movements along the PPF

and what could cause the PPF

to change positions.

Let's say Barb's diner

makes both pancakes and waffles

for breakfast.

Barb has a certain number

of waffle irons,

a certain amount of griddle space

for pancakes,

a certain amount of batter,

and a certain number of cooks.

If she uses all of her batter

and all of her cooks

to just make waffles

say that she could make

30 waffles an hour.

On the other hand

if she uses all of her batter

and all of her cooks

to just make pancakes

say that she can make

60 pancakes per hour.

Of course, it's more likely

that she'll produce

a mix of pancakes and waffles.

The possible combinations

are given by her PPF.

Now suppose that

she's currently producing here

making 20 pancakes

and 24 waffles per hour.

Then the Little League team

shows up after the game

and orders another 20 pancakes.

She can't just produce

40 pancakes

and the same 24 waffles.

She has to free up some of her batter

and some of her cooks

to make more pancakes.

She does that by producing fewer waffles

and using the extra resources

to make more pancakes.

That shows up

as a movement along

from this point

to this point.

Opportunity cost

is what you give up

divided by what you get.

So in this case

she gives up nine waffles

and gets 20 pancakes.

So the opportunity cost

of each pancake is nine over 20

or just under half of a waffle.

Keep in mind opportunity cost

is not the change in this axis

over the change on the other axis.

It's not the slope.

Since Barb can move in

either direction along her PPF,

the opportunity cost

is what she gives up

divided by what she gets,

and those swap from one axis to another

when she goes in different directions.

Now let's think about

how her PPF could change.

Suppose she doubles

the amount of ingredients

going into the batter.

Then she can make more of both dishes.

That shows up as a shift out in her PPF.

If she was originally producing

20 pancakes and 24 waffles

now she can make more pancakes

and the same number of waffles,

more waffles

and the same number of pancakes

or more of both.

On the other hand suppose

two of her cooks call in sick.

Even with the same amount of batter

and kitchen equipment

she can't make as many

waffles or pancakes.

That shows up as a shift in her PPF.

Again she can produce

the same number of waffles

and cut back on pancakes

or cut back on waffles

and make the same number of pancakes

or produce slightly fewer of each.

On the other hand suppose Barb buys

several more waffle irons.

That means that

if she devotes all of her batter

and cooks to making waffles

she can now produce many more,

maybe 50 per hour.

On the other hand

if she uses all of her batter

and cooks to make pancakes

she'll just be able to make

the same as before.

The waffle irons

don't help with pancakes.

Once again let's think

through her options

if she started off with 24 waffles

and 20 pancakes.

After getting the waffle irons

she could use her greater

efficiency at making waffles

to make more waffles

without giving up pancakes.

Keep the same number of waffles

and switch cooks

over to making more pancakes,

or some combination

that gives her more of both.

To sum up you need

to distinguish between factors

that will shift the PPF

and changes that will move you

along the PPF.

What factors will cause the PPF

to shift out versus shift in

and which factors cause

a symmetric shift versus a pivot.