1.5.1—Production possibility curve

A production possibility curve (PPC) shows the maximum attainable combinations of two goods or services from given resources, technology and institutions when resources are fully and efficiently used.

Points on the curve are productively efficient; points inside show underused or misallocated resources; points outside are unattainable with the current constraints.

A country choosing between food and machinery can move along its PPC by reallocating inputs, giving up some of one output to produce more of the other.

A point inside the curve is not impossible—it may be attainable but inefficient.