The Production Possibilities Curve

This is a Production Possibilities Graph. I will permit your organic optical sensors time to absorb this image.

Time is up. 

A Production Possibilities Curve (known as the PPC or PPF) is meant to show alternative ways to use resources. It shows how the production of one type of item can deplete the supply of another type of item.

I. Points on the Curve

• A: Attainable, but inefficient. Resources are underutilized. Can be due to recession, famine, war, underemployment or unemployment of resources, or a population decrease. 
• B: Efficient, but producing more guns than butter. This is unacceptable. Butter is the answer to everything.
• C: Efficient, but producing more butter. Yes. I approve.
• D: Efficient and attainable. (Mostly) everything is right with the world.
• X: Outside the curve, and unattainable. Can be caused by economic growth, technology, or discovery of new resources

II. Key Assumptions About a PPC

1. Two goods are being produced
2. There is full employment (4% unemployment and 80% factory capacity)
3. The resources are fixed (land, labor and capital)
4. The state of technology is fixed 
5. There is no international trade