Production possibility curve diagrams
The PPC
- A production possibility curve (PPC) shows the largest amounts of two goods a country can make using all its resources.
- Often capital goods vs consumer goods.
- on the curve → all resources used fully.
- inside → resources wasted (e.g. unemployment).
- outside → impossible now (not enough resources).
Practice
A point inside the PPC means:
Inside = waste/unemployment; on = full use; outside = impossible with today's resources.
Movements and shifts
- Moving along the curve = a trade-off: more of one good means less of the other (its opportunity cost).
- The whole curve shifts outward = economic growth (more/better resources, new technology).
- It shifts inward = economic decline (war, disaster, using up resources).
Practice
An outward shift of the whole PPC shows:
More or better resources shift the PPC outward — economic growth; war/disaster shifts it inward.
Practice
Moving along the PPC shows opportunity cost — making more of one good means making less of the other.
On the curve, resources are fully used, so more of one good requires giving up some of the other.
You've got it
Key idea
- PPC: on = full use, inside = waste/unemployment, outside = impossible
- moving along it shows opportunity cost (a trade-off)
- outward shift = growth; inward = decline