1.3 Production Possibilities Curve
The PPC shows all maximum combinations of two goods an economy can produce; points on the curve are efficient, inside are inefficient, outside unattainable.
The production possibilities curve (PPC) graphs the maximum combinations 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 of the PPC is the opportunity cost of the good on the x-axis. A bowed-out (concave) PPC means increasing opportunity cost because resources are specialized and don't transfer perfectly between goods; a straight-line PPC means constant opportunity cost.
Distinguish movement from shifting: reallocating production moves you along the curve, while more resources or better technology shifts the entire PPC outward — that is economic growth. Trade does not shift the PPC; it lets a country consume beyond it. A shift can also be biased toward one axis if the improvement helps only one good.
Key terms for 1.3
Drag the curves yourself — the fastest way to make 1.3 stick.
Reading a bowed-out PPC as constant opportunity cost. The bow means opportunity cost INCREASES as you produce more of one good; only a straight-line PPC has constant opportunity cost.
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