The Production Possibilities Curve (PPC) and Trade-offs

Vocabulary flashcards covering the Production Possibilities Curve (PPC), trade-offs, opportunity cost, efficiency, and economic growth concepts.

Production Possibilities Curve (PPC)

A model showing the maximum possible output combinations for two goods given available resources and technology, illustrating feasibility and efficiency.

Trade-offs

The relinquishment of one option to obtain another.

Opportunity Cost

The value of the next-best alternative forgone when making a choice; the true cost beyond price.

Efficiency

Using resources so that no opportunities are missed; includes productive and allocative efficiency.

Productive Efficiency

Producing at a point on the PPC where resources are fully utilized; no waste.

Allocative Efficiency

Producing the mix of goods that maximizes overall well-being given preferences and resources.

Feasible

A production point that lies on or inside the PPC; attainable with current resources and technology.

Feasible and Efficient

A point on the PPC where production is possible and the mix is efficient.

Feasible but Not Efficient

A point inside the PPC that can be produced but is not the most efficient combination.

Not Feasible

A point outside the PPC; unattainable with current resources and technology.

Constant Opportunity Cost

When the opportunity cost stays the same as output increases; the PPC is a straight line.

Increasing Opportunity Cost

When the opportunity cost rises as more of one good is produced; the PPC bows outward (concave to the origin).

Economic Growth

An outward shift of the PPC; an increase in an economy's production capacity.

Outward Shift of PPC

Movement of the PPC to a higher level due to more resources or technological progress.

Resources

Inputs used to produce goods and services; more resources can expand production possibilities.

Technology and resources

Advances that increase production efficiency and can shift PPC outward.