Production Possibility Curve (PPC)

Production Possibility Curve (PPC)

A graph representing the maximum possible output combinations of two goods that can be produced given limited resources.

Opportunity Cost

The trade-off between two goods or services when choosing to produce more of one at the expense of the other.

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.

Increasing Opportunity Cost

Occurs when you give up more and more of one good to produce another, represented by a concave PPC that curves outward.

Decreasing Opportunity Cost

Occurs when you give up less and less of one good to produce more of another, depicted by a convex or inverted concave PPC.

Constant Opportunity Cost

A situation where for every unit of one good (x) given up, a constant amount of another good (y) is sacrificed, shown by a linear PPC.

Efficient Use of Resources

Indicated by points on the PPC representing the optimal use of all available resources.

Inefficient Use of Resources

Represented by points inside the PPC, indicating that not all resources are being utilized.

Shifts in the PPC

When resources increase, the PPC shifts to the right; when resources decrease, it shifts to the left.