The Production Possibilities Curve (PPC)
The PPC shows the maximum output combinations of two goods
Key points on the PPC
Opportunity cost
Calculating opportunity cost from a PPC table
Law of increasing opportunity costs
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Bowed PPC = increasing opportunity costs; Straight PPC = constant opportunity costs
Constant vs. increasing opportunity costs
Calculating opportunity cost from a straight-line PPC
Worked example
Country A: Max 60 wheat or 30 cloth
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Shifts of the PPC
Outward shift (economic growth)
Economic growth shifts the entire PPC outward
Inward shift (economic decline)
One-sided shift
Technology improvement for Good X only shifts the PPC outward along the X-axis
Economic growth vs. actual growth
Efficiency concepts
Productive efficiency
Allocative efficiency
AP exam tips for 1.2
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Common mistakes
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