The Production Possibilities Curve

The production possibilities curve (PPC), sometimes called the production possibilities frontier, is one of the most useful diagrams in economics. It illustrates the maximum combinations of two goods (or two categories of goods) that an economy can produce when all its resources are fully and efficiently employed, given the current state of technology. Despite its simplicity, the PPC captures scarcity, choice, opportunity cost, efficiency, and economic growth in a single picture.

Reading the diagram

Imagine a graph with the quantity of one good, say consumer goods, on the horizontal axis and the quantity of another good, say capital goods, on the vertical axis. The PPC is a line that slopes downward from the top left to the bottom right, connecting the maximum amount of capital goods that