Production Possibilities Curve
A PPC is a model that shows alternative ways that an economy can use its scarce resources. This model graphically demonstrates scarcity, trade-offs, opportunity costs, and efficiency. Also known as Production Possibilities Frontier (PPF)
Four Key Assumptions
- Only two goods can be produced
- Full employment of resources
- Fixed Resources (ceteris paribus)
- Fixed Technology
Constant Opportunity Cost
Resources are easily adaptable for producing either good. Result is a straight line PPC (not common).
Increasing Opportunity Cost
As you produce more of any good, the opportunity cost will increase. Resources are NOT easily adaptable to producing both goods. Result is a bowed out (concave) PPC.
Decreasing Opportunity Cost PPС
