PPC Curves
• Production Possibilities Curve
• The PPC curve shows us the tradeo s associated with allocating resources between the
production of two goods
• It illustrates the concepts of scarcity, opportunity cost, e ciency, economic growth and
contractions
Marginal = +1
unit
Diagram :
A=
economically
ine cient
X = Future
Possibilities
Model Assumes 4 things
• Resources are used to produce one or both of
only two goods
• The quantities of the resources do not change
• Technologie/production techniques do not
change
• Resources are used in a technically e cient
way
ffi
ffi
ff
ffi
By Maurice V. Wülfing
Alternate shapes of PPC curves
• Constant opportunity cost
• Decreasing opportunity cost
By Maurice V. Wülfing
• When the PPC curve shifts outwards, this
shows that the economy is growing
(expanding)
• In order to achieve this the economy must
have either found new resources or improved
its existing resource to make them more
e cient
ffi
By Maurice V. Wülfing