Production Possibility Curves

Topic 1 introduced the three fundamental economic questions: what to produce, how to produce it, for whom to produce it. The PPC shows the what question in pure form.

• A point on the curve represents one specific answer to "what to produce" (a particular mix of the two goods).
• Sliding along the curve corresponds to choosing a different answer, which always carries an opportunity cost.
• A whole new curve (after a shift) corresponds to a changed range of feasible "what to produce" answers.

The PPC does not directly answer the "how" or "for whom" questions; those involve choices about production methods and income distribution, neither of which is shown on the two axes.