The document discusses the production possibilities curve (PPC), which illustrates the tradeoffs between two goods or services an economy can produce with limited resources. It shows that an economy can produce different combinations of goods along the PPC but cannot exceed the frontier without technological improvements or acquiring new resources. The PPC is typically concave because of increasing opportunity costs as more is produced of one good and less of the other.

1. Production possibilities curve

2. • Compare 2 variables; goods or services
• Trade-offs or opportunity cost involved
• All available resources are fully employed
• All available technology is fully employed
• Productive efficiency: Resources are
employed in the least costly way
Abstractions and Assumptions of a
PPC

3. What type of curve illustrates the
label below?
Increasing
opportunity
cost
per unit of
good B

4. What type of curve illustrates the
label below?
Increasing
opportunity
cost
per unit of
good B

5. What type of curve illustrates the
label below?
Zero
opportunity
cost
per unit of
good B

6. What type of curve illustrates the
label below?
Zero
opportunity
cost
per unit of
good B
improbable

7. What type of curve illustrates the
label below?
Constant
opportunity
cost
per unit of
good B

8. What type of curve illustrates the
label below?
Constant
opportunity
cost
per unit of
good B

9. What type of curve illustrates the
label below?
Decreasing
opportunity
cost
per unit of
good B

10. What type of curve illustrates the
label below?
Decreasing
opportunity
cost
per unit of
good B
Impossible;
not
supported
by
economic
theory

11. • What trade-offs are
involved?
• Why is the PPC
concave?
• What does point (E),
inside the PPC
illustrate?
• What is the
significance of point
(F), outside the PPC?
• Under what
conditions can point
F be reached?

12. Moving from point B
to point A, could
eventually expand
the frontier from
G,G to H,H