Production Possibilities Curve

The production possibilities curve (PPC) is a graphical representation of the different combinations of goods and services that an economy can produce with a given amount of resources. The PPC is typically a downward-sloping curve reflecting the law of increasing opportunity cost. It shows the maximum possible output combinations of two goods or services an economy can produce at different levels of resources. For example, if an economy has 100 resources to work with, it can produce 100 units of good X and 0 units of good Y, or it can produce 80 units of good X and 20 units of good Y, and so on. The further an economy moves away from its current resources, the steeper the opportunity cost, and thus, the more difficult it is to produce the goods. The PPC is used to illustrate the concept of scarcity, where resources are limited and choices must be made.