Check out these other AP Macro resources
The Production Possibilities Curve (PPC) is the 1st curve you will learn about in the AP Macroeconomics course, & it's quite simple.
We use the PPC to learn about trade-off, which is giving something up to have something else.
The PPC shows the tradeoffs in an economy that only produces 2 goods (I told you it was very simple!😄).
⬇️Here is how the curve looks.⬇️
How We View the Graph:
- on the axis, we have 2 goods: Guns & Butter(weird combination but ok 😂)
- at point D, say we produce 40 sticks of butter & 5 guns
- so the opportunity cost of producing 1 gun is 8 sticks of butter, while the opportunity cost of producing 1 stick of butter is 1/8 of a gun
The graph's main purpose is to show us efficiency.
- the line is curved to show increasing opportunity cost
- point's B, D, & C are efficiency in production (they are directly on the line)
- point A is inefficient and signals high unemployment or resources used inefficiently (any point below the curve)
- At point A, we can produce more guns and make the same amount of butter or vice versa - therefore we are inefficient at point A
- point X is only possible through trade or economic growth through education, technology, or physical capital increase (any point above the line)
There are 2 types of efficiencies:
- Productive: Producing as much as possible in the cheapest way
- Allocative: Producing a mix of goods that consumers want
The Graph's other Uses
- We can use two of the same graphs of different economies and compare them to find the best way to trade.
- Through comparing, we utilize terms such as comparative advantage & absolute advantage