Production possibility curves

Learning objectives

Define a production possibility curve and draw one showing the maximum combinations of two products an economy can make when its resources are fully used

Interpret points under, on and beyond a PPC as unemployed or inefficiently used resources, full use of resources and combinations that cannot yet be reached

Explain a movement along a PPC as a reallocation of resources and calculate the opportunity cost of the extra output from a table or a diagram

Explain the causes of outward and inward shifts of a PPC — changes in the quantity or quality of resources — and what each shift means for the growth of an economy