1. The Production Possibilities Curve
PPC

2. What does a PPC graph show?
The Production Possibilities Curve (PPC) shows all possible combinations of two goods to be produced.

3. PPC for the Nation
Guns
Butter

4. All resources are being used to produce guns.
1500
Guns
Butter

5. All resources are being used to produce butter.
1500
Guns
2000
Butter

6. Both guns and butter are produced
1100
Guns
1500
Butter

7. Production can be anywhere on or under the curve.
It may NOT be outside the curve– there are not enough resources to do so.

8. *PPC A At point A (on the frontier), production is EFFICIENT. Guns
Butter

9. PPC B At point B (inside the frontier), production is INEFFICIENT.
Guns
Butter

10. PPC: Trade-off
A and B represent tradeoffs. A produces more guns, B produces more butter. A B
Guns
Butter

11. How much of the alternate must be given up?
The PPC can be used to show the opportunity cost of choosing one good over the other.
How much of the alternate must be given up?

12. *PPC: Opportunity Cost
The opportunity cost of A equals the decrease in butter: 1100 units. A
1400 B
Guns
800
600
1700
Butter

13. A B The opportunity cost of B equals the decrease in guns: 600 units.
1400 B
Guns
800
600
1700
Butter

14. The PPC can also show economic growth by moving outward.
Due to additional resources, increasing population, or new technology.

15. *PPC Growth
Growth
Guns
Butter

16. 5 PPC Concepts Scarcity is represented by the frontier line.
2. Choices represented by pts A, B. or C.
3. Opportunity Cost is illustrated in terms of moving
from one point to another
4. Efficiency - using all available resources to produce.

17. Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
in table form
PIZZA
(in hundred thousands)
Robots
(in thousands)
graphical form
Robots
(thousands)
Pizzas (hundred thousands) 17

18. Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
in table form
PIZZA
(in hundred thousands)
Robots
(in thousands)
graphical form
Robots
(thousands)
Pizzas (hundred thousands) 18

19. Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
in table form
PIZZA
(in hundred thousands)
Robots
(in thousands)
graphical form
Robots
(thousands)
Pizzas (hundred thousands) 19

20. Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
in table form
PIZZA
(in hundred thousands)
Robots
(in thousands)
graphical form
Robots
(thousands)
Pizzas (hundred thousands) 20

21. Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
in table form
PIZZA
(in hundred thousands)
Robots
(in thousands)
graphical form
Robots
(thousands)
Pizzas (hundred thousands) 21

22. Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES Q 14 13 12 11 10 9 8 7 6 5 4 3 2 1
Not Possible A B W C
Possible
& Efficient
Robots (thousands) D
Possible
but
Inefficient E
Pizzas (hundred thousands) Q

23. How Is Economic Growth shown on a Graph? An outward shift (right)
[Ability to produce a larger
Amounts of goods over time] C A b
Capital Goods a B D
Consumer Goods

24. 3. Technological advances -
PRODUCTION POSSIBILITIES
Notes...
Economic Growth Q
Robots (thousands)
Pizzas (hundred thousands) 14 13 12 11 10 9 8 7 6 5 4 3 2 1
1. Increase in resources -
2. Better resource quality -
More of either or
both is possible
3. Technological advances -

25. Let’s Review What does the PPC show?
What do points inside the curve represent?
What do points outside the curve represent?
What do points on the curve represent?
How can we determine the opportunity cost?
How is economic growth represented on the PPC?
What can cause economic growth?