THE PRODUCTION POSSIBILITIES CURVE

The Production Possibilities Curve (PPC): The PPC is a curve that graphically shows the maximum quantity of one good that can be produced, given a specific quantity of another, from a given set of resources in a specified time period. A PPC is also a graphical representation of opportunity cost. An economy is efficient, i.e., it is getting the most it can get, when it is operating on its production possibilities curve.

The Production Possibilities Curve's Assumptions Resources are fully employed. There is a specified time period. Resources are fixed.

The quantity and quality of the labor force remain the same.

Capital inputs remain the same.

Technology does not change. Technology is society's pool of applied knowledge concerning how goods and services can be produced.