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1.4 Production possibility curve (PPC) diagrams

Production possibility curve (PPC) diagrams  IGCSE Economics Notes 2024/2025/2026 Exams

igcse-economics-notes-production-possibility-curve-ppc

Topics:

  • 1.4.1 definition of PPC
  • 1.4.2 points under, on and beyond a PPC
  • 1.4.3 movements along a PPC
  • 1.4.4 shifts in a PPC

Guidance

  • Definition, drawing and interpretation of appropriate diagrams.
  • The significance of the location of production points.
  • Movements along a PPC and opportunity cost.
  • The causes and consequences of shifts in a PPC in terms of an economy’s growth.

Note:

 

  • The video is  a preview of our revision notes
  • Note that notes get revised from time to time as per expert advice. 
  • All the IGCSE Economics Notes   are meant for revision and hence are fully downloadable as well as printable once you become a paid member.

Summary Notes

  • Production Possibility Curve (PPC): The PPC shows the maximum possible output of two types of products with existing resources and technology. It illustrates trade-offs between the production of different goods.
    • Point under the PPC : Indicates under-utilisation of resources—some resources are unemployed when goods are being produced.
    • Point on the PPC : Represents maximum utilisation of resources, meaning all resources are efficiently used.
    • Point above the PPC ): Represnts an unattainable point—there are not enough resources to produce outside the limit set by the PPC.
    • Any movement along the PPC represents the reallocation of resources from one good to another. For example, more resources directed towards making office furniture results in a decrease in the production of school furniture.
    • Bowed-Out PPC: The common shape, where an increase in the quantity of one product results in a decrease in the quantity of the other product. This indicates opportunity cost.
    • Straight-Line PPC: A rare case where resources are capable of producing both products equally, leading to a constant opportunity cost.
    • Increases in resources, such as additional labour or capital. Improvements in technology or techniques.On-the-job training for workers, improving efficiency and resource use.

Exam Tips

  1. Understand the PPC Curve: Be clear on the meaning of different points on the curve (under, on, and beyond) and what they represent in terms of resource utilisation.
  2. Use Real-World Examples: Explain the concept with practical examples like the production of school furniture versus office furniture to highlight trade-offs and opportunity costs.
  3. Link PPC to Efficiency and Opportunity Cost: Show how the PPC illustrates efficient resource use and the opportunity cost involved in reallocating resources.
  4. Know How Movements Affect Production: Understand how shifts along the PPC happen when resources are moved between different products, and the opportunity cost involved.
  5. Explain PPC Shifts: Be prepared to discuss factors that can cause the PPC to shift, such as increased resources or improved technology.