Production possibility curve (PPC)

The production possibility curve is a simplified image of the quantity that can be produced in an economy. A production possibility curve are plotted for only two products and it demonstrates the important concept that we must choose between two different products.

The production possibility curve shows the maximum quantity that can be produced of two different products in different combinations when all resources are in use. The production possibility curve has a negative slope and is concave, this indicates that resources are scarce and that we will give up more and more units of one product when we increase the production of the other product.

When the production is on the production possibility curve it is said to be efficient production and when production is inside the efficient frontier it is said to be inefficient production.