[MUSIC] Let's demonstrate the production possibility frontier with a numerical example. So suppose we have ten fields. And in each of these fields, we can either grow pumpkins. Or, we could grow strawberries. And just to be more specific, let's say in each of these fields we can either grow ten tons of pumpkins, or maybe we could, on each of these fields, grow five tons of strawberries. So now let's draw a production possibility frontier, and I'm going to put strawberries on the x-axis and pumpkins on the y-axis. If we devoted all ten of the fields to growing pumpkins, we would be able to grow 100 pumpkins, right? 10 X 10 = 100. On the other hand, if we devoted all our fields to strawberries, we would be able to grow 50 tons of strawberries. Again, ten fields times five tons per field is 50 tons of strawberries. What about combinations between these two goods? Well, so far I've told you that each of these fields is identical, so when we think about the production possibility frontier, in this case, please note that it's going to be a straight line combining these points. So again, why is this a straight line? Because each of these fields is identical. So, as we shift our fields from ten fields devoted to pumpkins to, for example, nine fields devoted to pumpkins, and one field devoted to strawberries. And then another field devoted to strawberries and another field devoted to strawberries. As we go through this process, we are always giving up the same number of pumpkins. Let's think about various combinations. For example, suppose that we wanted to devote six of our fields to growing pumpkins. Six fields devoted to growing pumpkins would lead 60 pumpkins. If we have six fields devoted to pumpkins, we have four fields remaining that we can devote to strawberries and in that case, we'll be able to grow 20 tons of strawberries. Let's call this combination, Combination A. Now suppose we want ten more units of strawberries, so instead of being in Combination A, we would like to move to Combination B, that allows us to have 30 units of strawberries. Well the only way to do that is to give up two of the pumpkin fields and devote them to strawberries. And if we take away two of the pumpkin fields, then how many pumpkins do we have left? We have four fields of pumpkins left, which will yield us only 40 pumpkins. So, why did I go through this numerical example? Not because I'm so crazy about arithmetic, but because I wanted to demonstrate that the slope of the production possibility frontier is precisely the opportunity cost of growing strawberries, in terms of pumpkins. As we move from point A to point B, we are giving up 20 pumpkins, in order to receive ten strawberries. So the slope of the production possibility frontier in absolute value is equal to the amount of pumpkins that we give up in order to get an additional strawberry. In other words, it's equal to the opportunity cost of one strawberry, in terms of pumpkins.