Economics • Basic Economic Ideas

Production Possibility Curve

Capital goods vs consumer goods

  • A, B, C: efficient
  • X, Y: inefficient
  • Z: unobtainable
0 30 60 90 120 150 0 30 60 90 120 150 Capital goods Consumer goods
Shift the curve

Shift the curve and see what happens to your combination. The dashed line shows where the curve was.

Choose a combination

Your combination is efficient
Capital goods
70
Consumer goods
71
Most capital goods
100
Most consumer goods
100

Production Possibility Curve — Explanation

A production possibility curve (PPC) shows the most an economy can produce of two goods with the resources and technology it has now, if they're all used fully and efficiently.

Use a PPC to explain efficiency, opportunity cost and economic growth.

Choose a pair of goods in the title bar, move the sliders to pick a combination and see how it's classified, then shift the curve and see what happens to the same combination.

For Cambridge International AS Level Economics (basic economic ideas: production possibility curves) and NCEA Level 2 Economics.

Where this fits

  • AP: AP Macroeconomics; AP Microeconomics
  • AQA: AQA A Level Economics (7136)
  • Cambridge: Cambridge IGCSE Economics (0455); Cambridge A Level Economics (9708); Cambridge AS Level Economics (9708)
  • IB: IB Economics HL; IB Economics SL
  • NCEA Level 2 Economics: 91224 Analyse economic growth using economic concepts and models; 91225 Analyse unemployment using economic concepts and models
  • Pearson Edexcel International: Edexcel International GCSE Economics (4EC1); Edexcel International A Level Economics
  • USDP: USDP Economics

Production Possibility Curve — Key Terms

Key concepts in English, with te reo Māori, Chinese (Simplified) and Korean.

EnglishTe reo Māori中文（简体）한국어What it means on this page
Production Possibility Curve (PPC)no attested term生产可能性曲线 (shēngchǎn kěnéngxìng qūxiàn)생산가능곡선 (saengsan ganeung gokseon)The boundary showing the maximum combinations of two goods an economy can produce with its existing resources and technology, assuming full and efficient use.
Opportunity Costno attested term机会成本 (jīhuì chéngběn)기회비용 (gihoe biyong)The value of the next best alternative given up when resources are reallocated from producing one good to producing another — shown as a movement along the curve.
Productive Efficiencyno attested term生产效率 (shēngchǎn xiàolǜ)생산적 효율성 (saengsanjeok hyoyulseong)Achieved at any point ON the PPC: no more of one good can be produced without producing less of the other.
Underutilisation of Resourcesno attested term资源未充分利用 (zīyuán wèi chōngfèn lìyòng)자원의 저활용 (jawon-ui jeohwal-yong)A point INSIDE the PPC, where resources are unemployed, underemployed or poorly allocated, so output of both goods could rise without any extra resources.
Unattainable Combinationno attested term不可达到的组合 (bùkě dádào de zǔhé)달성 불가능한 조합 (dalseong bulganeunghan johap)A point OUTSIDE the current PPC — not achievable with the economy's present resources and technology.
Economic Growthtipu ohaoha经济增长 (jīngjì zēngzhǎng)경제 성장 (gyeongje seongjang)An outward shift of the whole PPC caused by more resources or better technology, raising the potential output of both goods.
Economic Developmentwhanaketanga ohaoha经济发展 (jīngjì fāzhǎn)경제 발전 (gyeongje baljeon)A broader improvement in living standards and wellbeing. On a PPC it is often shown as an uneven outward shift, favouring the goods and services that raise quality of life rather than growth in every good equally.
Increasing Opportunity Costno attested term机会成本递增 (jīhuì chéngběn dìzēng)기회비용 체증 (gihoe biyong chejeung)The reason the PPC bows outward: resources are not perfectly suited to producing both goods, so each extra unit of one good costs progressively more of the other.

On the te reo Māori column. Terms marked as gaps have no attested equivalent in the sources checked — Karaitiana Taiuru's Dictionary of Māori Computer and Social Media Terms, Paekupu, the Reserve Bank's te reo financial glossary, NZQA and Te Aka. No coinage is printed as though it were established; where a class needs one, commission it from Te Taura Whiri i te Reo Māori and credit the translator. Te reo Māori is not italicised and takes no plural "s".