Production Possibilities Curve/Frontier (PPC, PPF, same thing!)

A production possibilities curve or frontier (PPC, PPF) is a graphical representation of different rates of production of two g/s (in this case, capital and consumer goods) that an economy can produce efficiently at a given time period, at a given level of technology and with finite factors of production. Here, point A represents a corresponding level of capital goods and consumer goods (which should be labeled accordingly). If the output increases to point B, there has been actual growth. Because no consumer goods have been given up, the concept of opportunity cost does not apply. In fact, opportunity cost is essentially irrelevant within the PPC and is only to be used when comparing two points ON the curve (like C and D). Here, we can see to get more consumer goods, the society has to give up capital goods (the distance of the corresponding arrows). Thus, we can show opportunity costs using the PPC. A shift out in the PPC illustrates economic growth, or the increase in the value of the goods and services produced in an economy over a given time period. This suggests an increase in the potential growth of the economy. However, given today's state of technology and store of FoPs, point E is currently unattainable.