1.2 Opportunity Cost and the Production Possibilities Curve (PPC)
The PPC shows the maximum combinations of two goods an economy can produce; its slope measures opportunity cost, and a bowed-out shape means increasing cost.
The production possibilities curve graphs every maximum combination of two goods an economy can produce with its current resources and technology. Points on the curve are productively efficient, points inside are attainable but inefficient (unemployed or misused resources), and points outside are unattainable for now.
The slope tells you opportunity cost: moving along the curve, the amount of one good given up per extra unit of the other. A bowed-out (concave) PPC shows increasing opportunity cost because resources are not equally suited to producing both goods; a straight-line PPC shows constant opportunity cost.
A movement along the PPC is a trade-off; a shift of the whole curve is economic growth or contraction. More resources, better technology, or more capital shift the PPC outward, and on the exam, growth means the curve itself moves, not a point sliding along it.
Key terms for 1.2
Drag the curves above, or open the full Production Possibilities sandbox. Teaching this? Put this graph on your own class page, free.
Reading a bowed-out PPC as constant opportunity cost. Concave-to-the-origin means opportunity cost increases as you produce more of a good; only a straight-line PPC has constant opportunity cost.
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A full lesson plan for 1.2, with timings, a warm-up, guided practice and an exit ticket.
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