0455

Production Possibility Curves

Basic Economic Problem · 4 question types

Practise

Exam Frequency Analysis

Past paper frequency (2018 to 2024)

This topic accounts for approximately 10% of your exam marks.

stable
Medium
Stable10%

PPC diagram interpretation appears in roughly half of all Paper 2 sittings; outward shifts and opportunity cost from the diagram are the key mark points.

Production possibility curve for capital goods against consumer goods: points A, B, C and D lie on the curve (efficient), point E lies inside (inefficient) and point F lies outside (unattainable)
Source: Production Possibility Curves by Save My Exams

A PPC always has two axes. Each axis is the quantity of one good that the economy might produce. Common pairings:

  • on one axis, on the other (the most common pairing).
  • Food vs clothing; agricultural goods vs manufactured goods; healthcare vs education.

The curve typically bows outward away from the origin. It starts where all resources go to good A (one extreme), ends where all resources go to good B (the other extreme), and passes through every efficient mix in between.

A reminder of two terms the syllabus uses on this diagram.

  • Capital goods are man-made productive assets used to make other goods (machines, tools, factories). An industrial 3D-printer on a parts manufacturing line is a capital good.
  • Consumer goods are final products bought to be enjoyed or used up (a watch, a smartphone, a pair of shoes). They have no further productive use.