Production possibility curves Cambridge IGCSE Economics (9–1) revision
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In plain words
Imagine an economy that makes only two kinds of thing, say food and machines. A production possibility curve (PPC) shows the most it can make of one for each amount of the other, when all its resources are fully and efficiently used.
The curve is a picture of scarcity. To have more of one good you must move along the curve and give up some of the other.
5 things to know
- A point on the curve: resources are fully and efficiently used.
- A point inside the curve: some resources are unemployed or used inefficiently. More of both goods could be made.
- A point outside the curve: cannot be reached with the resources there are now.
- A movement along the curve shows opportunity cost: the amount of one good given up to gain more of the other.
- The curve shifts outwards when the quantity or quality of resources rises: that is economic growth. It shifts inwards when resources are lost, as in a war or natural disaster.
Worked example
An economy can make 100 cars and 50 houses, or 80 cars and 60 houses. What is the opportunity cost of the extra 10 houses?
- Moving along the curve, houses rise from 50 to 60.
- Cars fall from 100 to 80.
- The opportunity cost of 10 more houses is 20 cars.
Tips and tricks
- Moving from inside the curve to a point on it has no opportunity cost: more of both goods can be made, using resources that were idle.
- A shift of the curve and a movement along it are different things. A shift needs a change in resources or technology.
It lands in your notebook with its questions as flashcards.
Production possibility curves: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
What does a point outside a production possibility curve represent?
The curve is the limit of what present resources can produce.
What does a movement along a production possibility curve show?
More of one good means less of the other.
Which would shift a production possibility curve outwards?
Better technology lets the same resources produce more.
An economy is producing at a point inside its curve. What is true?
Idle resources can be put to work without giving anything up.
An earthquake destroys many factories. What happens to the production possibility curve?
The economy has lost capital, so it can produce less than before.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 7 marks. Write your answers on paper, then check them.
Production possibility curves
Cambridge IGCSE Economics (9–1) 0987 · 7 marks · papermunch.org
Name ______________________________ Date ______________
State what a point inside a production possibility curve shows.[2]
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Resources are unemployed or not being used efficiently, so less is produced than is possible.
Give two causes of an outward shift of a country's production possibility curve.[2]
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Any two of: more resources, such as a larger labour force or newly found raw materials; better technology; better education and training.
An economy moves from making 40 tonnes of rice and 30 tractors to 55 tonnes of rice and 22 tractors, staying on its curve. Calculate and explain the opportunity cost.[3]
Show answerHide answer
It gives up 8 tractors to gain 15 tonnes of rice. Resources are fully used, so making more rice means moving resources out of tractor production.
Answers: Production possibility curves
- 1. Resources are unemployed or not being used efficiently, so less is produced than is possible.
- 2. Any two of: more resources, such as a larger labour force or newly found raw materials; better technology; better education and training.
- 3. It gives up 8 tractors to gain 15 tonnes of rice. Resources are fully used, so making more rice means moving resources out of tractor production.