Production possibility curve (PPC)

A production possibility curve (PPC) is a graphical representation of the different combinations of two types of goods that can be produced with a given set of resources, based upon the level of technology available and the current state of production. PPCs can be used to illustrate the concept of opportunity cost, which is the cost of the forgone alternative when making any specific choice. PPCs are also used to show the maximum potential output of a given economy, taking into account all its resources and current production technology. Typically, the PPC is downward sloping, reflecting the tradeoff between producing al types of goods. Point on the curve represent allocative efficiency, meaning that the resources used generate the maximum output possible. Points inside the curve represent inefficiencies, as more output is possible if the economy’s resources are reallocated. Points outside the curve are unattainable, as the current technology and resources are insufficient to create the desired output levels.