Production Possibilities Curve (PPC)

Definition

The Production Possibilities Curve (PPC), also known as the Production Possibility Frontier (PPF), is a graphical representation showing all possible combinations of two goods or services that can be produced using limited resources efficiently. It illustrates trade-offs and opportunity costs in an economy.

Analogy

Think of the PPC as a menu at a restaurant. Just like how a menu shows all the different food options you can choose from, the PPC displays all the possible combinations of goods that an economy can produce given its resources and technology.

Related terms

Efficiency: The state where resources are allocated in such a way that maximum output is achieved.

Opportunity Cost: The value of the next best alternative foregone when making a choice.

Economic Growth: An outward shift of the PPC over time, indicating an increase in an economy's production capacity.