D C B Capital Goods A Consumer Goods Production Possibility Curve- A visual way of illustrating the concept of opportunity cost. Shows the quantity of a good or service that must be given up to gain another good or service. The curve represents the maximum combination of 2 products that can be produced with a set amount of resources. Resources are being used in the most efficient manner possible. Point A- NOT using all resources; attainable D C Point B- Using all resources; attainable; more capital goods AND more consumer goods B Capital Goods Point C- Using all resources; attainable; More capital goods BUT less consumer goods A Point D- Not enough resources; unattainable; beyond the maximum! Consumer Goods

Less resources is often caused by war or natural disaster More resources → PPC shifts outwards Less resources → PPC shifts inwards Capital Goods Productive Resources Natural Human Capital Entrepreneurship Technology Consumer Goods Less resources is often caused by war or natural disaster