1.2 production possibilities curve (copy)

production possibilities curve

depicts the tradeoffs of opportunity costs of production choices, shows all combinations of two goods/categories of goods an economy can produce with fixed prices

point ON the curve

resources are being used efficiently

point INSIDE the curve

resources are being used inefficiently

point OUTSIDE the curve

impossible; the curve represents maximum resources

ppc shifts inward

quality/quantity/technological changes of products decreases

ppc shifts outward

quality/quantity/technological changes of products increases

concave ppc

the opportunity cost increases with increased production of either product

linear ppc

the opportunity cost stays constant, the two goods use the same resources to be made

capital goods

machines/tools used to make produce other goods (used to produce consumer goods)

consumer goods

finished products consumed/bought by individuals