Production Possibilities Curve

B, D, C - Attainable and efficient
A - Attainable yet inefficient (underutilization)
X - Unattainable in current state

Also known as the PPC, PPF, or PPG

The PPC shows alt. ways of resource usage

4 Assumptions

1. 2 goods
2. Fixed resources
3. Fixed technology
4. Full employment of resources

Efficiency

• Efficiency - Max usage of resources; little wasted
• Allocative - Products produced most desired by society
• Productive - Products produced w/ least cost; any point on curve
• Underutilization - Using fewer resources than economy's capability

Movements of the PPC

1. Inside PPC - when resources are unemployed
2. Along PPC - on curve
3. Shifts of PPC
• Increase - graph moves ->
• Decrease - graph moves <-

Causes of Shift

1. Tech change (Out)
2. Resource change (Out)
3. Economic growth
4. Natural disasters/war/famine (In)
5. Labor change (In)
6. Increase in education & training (Human capital) (In)