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