Every choice has an opportunity cost: the next best thing you give up. The production possibilities curve (PPC) shows that trade-off for a whole economy making two goods. Move the point along the curve, push it inside or outside, shift the curve, and then work AP-style table problems with the calculator.
This economy makes two goods, pizzas and robots. The table lists six points on its PPC. Pick a point, drag the sliders, or try a scenario. The dashed grey curve shows where the PPC started once something shifts it.
| Point | Pizzas | Robots | Cost of each extra pizza |
|---|
AP questions often give you a table instead of a graph. Choose a preset, pick the move, and the calculator shows each line of work. You can also check whether a combination is on, inside, or outside the curve.
The value of the next best alternative you give up when you make a choice. On a PPC, the opportunity cost of more of one good is the amount of the other good the economy must stop making.
A point on the curve uses all resources fully and efficiently. A point inside means unemployed or underused resources. A point outside cannot be produced with current resources and technology.
A straight-line PPC means each extra unit costs the same amount of the other good. A PPC bowed out from the origin means each extra unit costs more than the one before. That is the law of increasing opportunity cost.
Resources are not equally suited to making both goods. The first workers and machines moved into pizza making are the ones best at it and worst at robots. As you keep going, you pull in robot experts who make few pizzas, so each pizza costs more robots.
Every point on the PPC is productively efficient: no resources are wasted. Only one point is allocatively efficient: the combination of goods that society values most. A point inside the curve is neither.
More or better resources (labor, capital, natural resources) or better technology shift the PPC outward. Technology that helps only one good moves only that good's intercept. Making more capital goods today shifts the PPC out farther in the future.
Memorize which events move a point and which events shift the curve. A shift needs a change in resources or technology.
| Event | What happens on the graph | Why |
|---|---|---|
| Recession, rising unemployment | Point moves inside the PPC; the curve does not shift | Resources still exist but sit idle |
| Economy returns to full employment | Point moves out to the PPC | Idle resources go back to work; no opportunity cost to reach the curve |
| Society wants more of one good | Movement along the PPC | Resources move between goods; the trade-off is the opportunity cost |
| More labor (immigration, population growth), more capital, new natural resources | Whole PPC shifts outward | More resources can make more of both goods |
| Better education and training (human capital) | Whole PPC shifts outward | Workers become more productive in both goods |
| New technology for one good only | Only that good's intercept moves out; the other intercept stays put | The technology does not help produce the other good |
| Natural disaster or war destroys factories and land | PPC shifts inward | Fewer resources exist |
| Producing more capital goods today | Point on today's PPC with more capital goods; larger outward shift later | More capital today raises future productive capacity |
AP-style multiple choice. Pick an answer to see the explanation.
The vocabulary for topic 1.2. Read the list, flip through flashcards, or quiz yourself. For every term in the unit, see the Unit 1 terminology guide.