Production possibility curves
| English | Chinese | Pinyin |
|---|---|---|
| production possibility curve | 生产可能性曲线 | shēng chǎn kě néng xìng qū xiàn |
| spare capacity | 闲置产能 | xián zhì chǎn néng |
| opportunity cost | 机会成本 | jī huì chéng běn |
| concave | 凹形的 | āo xíng de |
| economic growth | 经济增长 | jīng jì zēng zhǎng |
| technology | 技术 | jì shù |
Guns or butter?
- A famous wartime choice: an economy can build weapons or make consumer goods — but with fixed resources, more of one means less of the other.
- The production possibility curve 生产可能性曲线 (PPC) draws that trade-off exactly.
Reading the curve
- The PPC shows the maximum combinations of two goods an economy can produce with all resources fully and efficiently used.
On the curve = efficient; inside = spare capacity 闲置产能; beyond = impossible with current resources.
The production possibility curve
Frontier = maximum efficient combinations
The PPF is concave: making more of one good costs ever more of the other.
A point exactly on the PPC represents an economy that is:
On the curve = full, efficient use; inside = spare capacity; beyond = unattainable.
Opportunity cost 机会成本 along the curve
- Moving along the PPC, gaining one good costs units of the other — that sacrifice is the opportunity cost.
- The curve bows outward (concave 凹形的) because resources aren't equally good at both jobs, so opportunity cost rises as you specialise.
The PPC bows outward because opportunity cost rises as an economy specialises in one good.
Resources are not equally suited to both goods, so each extra unit costs more of the other — a concave curve.
An economy moves along its PPC and gains 10 tanks while losing 40 tractors. What is the opportunity cost of one tank (in tractors)?
40 tractors ÷ 10 tanks = 4 tractors per tank.
Shifts: growth and decline
- The whole curve shifts outward with economic growth 经济增长 — more resources (labour, capital) or better technology 技术.
- It shifts inward after a disaster or war that destroys resources.
- A point moving from inside toward the curve = using up spare capacity (recovery), not growth.
Movement along ≠ shift of the curve. Producing a different mix is a move along the PPC; only more/better resources or technology shift the whole curve outward.
Which causes the whole PPC to shift outward?
More/better resources or technology shift the curve out; changing the mix is just a move along it.
Order these from "spare capacity" to "more capacity".
Inside = wasted resources; on = efficient; an outward shift = genuine growth in capacity.
You've got it
- the PPC shows max output combinations; on = efficient, inside = wasteful, beyond = unattainable
- moving along it has an opportunity cost; it bows outward as opportunity cost rises
- economic growth shifts the whole curve outward; movement along it just changes the mix