Production Possibility Curves

A production possibility curve (PPC) is a graph showing the maximum combinations of two goods that an economy can produce when every resource is fully and efficiently employed at the current state of technology.

Two parts of the definition are essential.

• Maximum combinations. The curve shows the upper limit of what the economy can produce, not what it currently does produce.
• Full and efficient employment + current technology. The curve is drawn for a fixed set of resources and a fixed level of technology. Change either assumption and the curve shifts.

The PPC is the cleanest way to picture three of the syllabus's earliest concepts at once: scarcity, choice and opportunity cost.