Production possibility curve diagrams

Vocabulary

English	Chinese	Pinyin
production possibility curve	生产可能性曲线	shēng chǎn kě néng xìng qū xiàn
trade-off	取舍	qǔ shě
efficient	有效率的	yǒu xiào lǜ de
unemployed	闲置的	xián zhì de
economic growth	经济增长	jīng jì zēng zhǎng
technology	技术	jì shù

More guns or more butter?

A country can use its resources to make weapons or consumer goods — but with limited resources, more of one means less of the other.
The production possibility curve 生产可能性曲线 (PPC) draws this trade-off 取舍.

The PPC shows the maximum combinations of two goods an economy can make using all its resources fully.

On the curve = efficient 有效率的; inside = resources wasted; beyond = impossible with current resources.

Explore

Frontier = maximum efficient combinations

The PPF is concave — a trade-off between two goods.

Practice

A point on the PPC represents an economy that is:

Moving along the PPC to make more of one good means giving up some of the other — that's the opportunity cost.
A point inside the curve means resources are unemployed 闲置的 or wasted.

Moving along the curve gains consumer goods but gives up capital goods — the opportunity cost.

Practice

A point inside the PPC shows:

Practice

Moving along the PPC to produce more of one good has an opportunity cost.

The whole curve shifts outward with economic growth — more or better resources, or new technology 技术.
It shifts inward if resources are lost (war, disaster).

Economic growth shifts the whole PPC outward; losing resources shifts it inward

Watch out

Moving along ≠ shifting the curve. Changing the mix of goods is a move along the PPC; only more/better resources shift the whole curve outward.

Practice

Which shifts the whole PPC outward?

Practice

Economic growth shifts the PPC ______.

Key idea

the PPC shows max output combinations: on = efficient, inside = wasteful, beyond = unattainable
moving along it has an opportunity cost
economic growth shifts the whole curve outward