Production Possibility Curves

Production Possibility Curves/Frontier - shows the most that society can produce if it uses every available resource at the best of its ability

• Productive Possibility Graph:

            

• Point A : is efficient but produces more capital goods
• Point B : is efficient or attainable
• Point C : is efficient but produces more consumer goods
• Point D : is a attainable but inefficient, it under utilizes its resources
1. decrease in population
2. underemployment or unemployment
3. wars or famine
• Point E :  is the region of being unattainable
1. Technological Improvement
2. Economic Growth
3. Discovering New Resources

Key Assumptions:

1. Two goods are produced
2. Full Employment (FE)
   
• not 100% employment
• not 100% productive
• approximately 4-5% employment
• approximately 80% factory capacity
3. Fixed resources
1. land
2. labor
3. capital
4. Fixed state of technology
5. No international trade