1.3 Production Possibilities Curve

a. Define (using graphs as appropriate) the production possibilities curve (PPC) and related terms. b. Explain (using graphs as appropriate) how the production possibilities curve (PPC) illustrates opportunity costs, trade-offs, inefficiency, efficiency, and economic growth or contraction under various conditions. c. Calculate (using data from PPCs or tables as appropriate) opportunity cost.

• The PPC is a model used to show the trade-offs associated with allocating resources.
• The PPC can be used to illustrate the concepts of scarcity, opportunity cost, efficiency, underutilized resources, and economic growth or contraction.
• The shape of the PPC depends on whether opportunity costs are constant, increasing, or decreasing.
• The PPC can shift due to changes in factors of production as well as changes in productivity/technology.
• Economic growth results in an outward shift of the PPC.
• Enduring understanding MKT-1: Most resources are scarce, and in most cases the use of resources involves constraints and trade-offs.