Recall Opportunity cost is the value of the best forgone alternative

PPC The production possibilities curve(PPC) is a diagram that shows production combinations available to an economy given finite factor inputs and technology It is a model economists use to illustrate the concept of opportunity costs

Simple Linear Model Say you are a house painter and you and your crew can paint either 20 small houses or 10 large houses in a week. You can also paint a number of combinations of the two. It takes the same amount of time to paint one large house as it does to paint 2 small houses.

Simple Linear Model So what is the opportunity cost of painting one large house? 2 Small Houses What is the opportunity cost of painting two small houses? 1 Large House

Simple Linear Model Small Houses Large Houses

Simple Linear Model We use these points on a graph to find the PPC

Simple Linear Model All points on the line are said to be efficient because they represent the maximum number of houses that can be painted with available resources and technology You could paint any combination of houses on or inside the PPC

Simple Linear Model These points inside the model are attainable, but inefficient—you are not working up to your capabilities. Points outside of the PPC are unattainable and cannot be reached due to the lack of resources required to reach those points.

Simple Linear Model You could increase your PPC if you increase your factors of production, or resources.

Non Linear Model