Let’s say you’re some

type of a hunter gatherer and you’re trying to figure

out how much of your time to 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’re talking

about gathering, the only thing you can gather

are some type of berries. That’ll 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 you can get and then let’s call this

the number of berries. Let’s do this column as

the number of berries that you can get. So if you were to spend your

entire day going after rabbits, all your free time

out– making sure you have time to

sleep, and get dressed, and all those type of things. Let’s say that you can actually

get five rabbits, on average, in a given day. But if you spend all

your time getting rabbits you’re not going to have

any time to get berries. So you’re going to be

able to get 0 berries. Now let’s say that you were

to allocate a little bit more time to get berries and a little

bit less time to get rabbits. So we’ll call that

Scenario B. We’ll call scenario B the reality

where you have enough time to get 4 rabbits on average. And when you do that,

all of a sudden you’re able to get 100 berries. And when we do these

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,

or you’re not somehow looking to do other

things with your time. So all other things are equal. And the general term for

this, and it sounds very fancy if you were to say

it in a conversation, is ceteris paribus. Which literally means– so any

time someone says, oh ceteris parabus, 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 in paribus,

other things equal. So 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’re 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 to get– or if

you’re only getting 3 rabbits, you’re now 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 to 180 berries and I’ll do one

more scenario here. So let’s say Scenario F– and

let’s call these the scenarios. Scenarios A through

F. So Scenario F is 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 it right over here. So this axis, I will call

this my rabbit axis, rabbits. And we’ll start. That will be 0. And then this will

be 1, 2, 3, 4, and then that will be 5 rabbits. And then in 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’ve done all these

colors in that 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. 3 rabbits, 180. Let’s see this would be 150. 180 will be like

right over there. So 3, 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. Actually, a little bit lower. So this would be 250, so 240 is

a little bit lower than that. So it’ll be right over there. That is Scenario D. Scenario E, if you

have time for 1 rabbit, you have time for 280 berries. So 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. 0 rabbits, 300 berries. That’s right over there. So this is Scenario F. So what all of these

points represent, these are all points– now 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 and 1/2 rabbits on average, on average

get 3 and 1/2 rabbits, and then you’d have a

different number of berries. So these are all points on

the different combinations between the trade offs

of rabbits and berries. So let me connect all of these. Let me connect them in a

color that I haven’t used it. So let me connect them. And do you see– this

should just be one curve. So I’ll do it 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 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 and 1/2 rabbits. So some days you would get 4

rabbits and every other day you would get 5

rabbits, so maybe it averages out to 4

and 1/2 rabbits. And then maybe it

looks like you would 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 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 five scenarios,

actually these six 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 possibilities 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 a scenario like this. So this right over here

would be impossible Let me scroll over to

the right a little bit. Let me scroll, see

my scrolling thing. OK, so this right over

here is impossible, this point right

over here where I’m getting 5 rabbits

and 200 berries. If I’m getting five rabbits,

I’m spending all my time on rabbits. I have no time for berries. Or another way to think about

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 that’s 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. All of these points

right over here are– 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. If I have 200 berries, I

could get more rabbits. Or if I’m concerned, if

I only want one 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

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 maybe 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 judgment between whether any

of these possibilities 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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