Lesson 1.2: The Production Possibilities Curve

Flashcards made from a presentation segment created as a lesson on the Production Possibilities Curve (PPC).

Production Possibilities Curve (PPC)

A model that expresses the efficient production capacity of two items given a limited amount of resources; areas inside the curve are inefficient and areas outside the curve are impossible unless the curve is modified

Opportunity cost

The value of the next-best alternative; can demonstrate what is lost when moving along a production possibilities curve

Inefficiency

The incomplete utilization of resources in a production possibilities curve; this can be seen with points below the curve

Efficiency

The maximal utilization of resources in a production possibilities curve, expressed by all the points that fall on the curve

Impossibility

An impossible over-utilization of resources in a production possibilities durve, expressed by all the points that fall above or outside the curve