Production Possibilities Curves

production possibilities curve

a graph that shows alternative ways to use an economy's resources

underultilization

using fewer resources than an economy is capable of using, not what we want! Point X.

Impossible to Reach with Existing Resources

a point outside the PPC curve, such as point E.

Economic Growth

The situation has changed so we can produce more or both products. Technology has improved or more workers added. Curve Shifts Right.

Curve Moves Left

We have lost workers, factories are destroyed, or machines break down. We are producing less of both products.

Trade-offs

The list of options when making an economic decision

Production can only occur

when all 4 factors of production are employed.

Land

A.K.A - Gifts of nature, natural resources, parts

Labor

workers with all of their skills, abilities and talents

Capital

Tools and machinery

Financial Capital

money borrowed or invested in new business

Specialization

employees doing the task they are best at

Entrepreneurship

risking financial capital in order to make a profit