Production Possibilities Curve (PPC)

Concepts

  • Production Possibilities Curve (PPC)
  • Capital Goods vs. Consumer Goods (Durable vs. Nondurable)
  • Trade-offs
  • Opportunity Cost
  • Law of Increasing Opportunity Costs
  • Bowed vs. Straight PPC
  • Efficient, Inefficient and Unattainable Points
  • Shifting the PPC

Overview

Imagine an economy that could only produce two goods, capital goods and consumer goods.  In this hypothetical world there is a lot of insight we can gain by looking at a model called the Production Possibilities Curve.  The main idea of this model is to illustrate the productive capacity of an economy.  We can also use this model to answer some important questions about an economy.  For instance: Are resources being utilized efficiently?  Is it possible to produce a certain combination of products?  What does it look like when the economy grows?  What does it look like when the economy contracts?  In other words, the PPC is a great model to introduce a lot of the basic economic concepts we will use throughout this class.

Materials

Lecture

Video Coming at Later Date

Quiz

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