Micro Topic 1.3- Production Possibilities Curve

Production Possibilities Curve (PPC)

A model that shows alternative ways that an economy can use its scarce resources.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Opportunity Cost

The value of the next best alternative that is given up when making a choice.

Efficiency in the PPC context

When the economy is producing on the curve, using all resources fully.

What are the 4 key assumptions of the PPC?

Only two goods can be produced, full employment of resources, fixed resources, and fixed technology.

What are the 3 shifters of the PPC?

Change in resource quantity or quality, change in technology, change in trade.

Ceteris Paribus

A Latin phrase meaning 'all other things being equal,' used in economic models to isolate the relationship between variables.

Graphical representation of PPC

Visually demonstrates the trade-offs, opportunity costs, and efficiency between two goods.

What happens if there is a change in technology in the PPC?

The PPC can shift outward, indicating an ability to produce more of both goods.

What is the significance of full employment in the PPC?

It ensures that resources are being used optimally, represented by points on the curve.