Production Possibilities Curve
assumptions
- 2 goods being produced - fixed resources - fixed technology - no trade - full efficiency & full employment
shape of the graph/curve
concave to the origin
resources
not equally specialized/adaptable
points outside the graph/curve
unattainable; would represent greater output than input at any point on the curve
fixed technology
state of technology does not change during analysis
opportunity cost
the amount of other products that must be forgone or sacrificed to obtain one unit of a specific good; any movement on the graph/on the curve; increasing
quality and quantity increase
PPC increase
points on the graph/curve
achieve both full efficiency & full employment
points inside the graph/curve
attainable but reflect inefficiency
fixed resources
available supplies of the factors of production are fixed in quantity/quality; different uses
full employment
employing all available resources
ice cream consumption
give up pizza production
shift of the graph/curve
outward: employment, productive efficiency, more resources, better quality resources, technological advances, international trade, lenient immigration inward: unemployment, productive inefficiency, discrimination, custom/heredity/caste systems,
full productive efficiency
producing goods and services at least cost
consumer goods
products that satisfy our wants directly
capital goods
products that satisfy our wants indirectly by making possible more efficient production of consumer goods