A production possibility curve illustrating the concept of opportunity cost and the trade-offs between producing two goods: mangos and bananas.
ppc
Production Possibility Curve (PPC): Represents the maximum possible output combinations of two goods an economy can produce when resources are fully and efficiently used.
point a
Point a: Produces 150 mangos and 100 bananas. More mangos, fewer bananas.
point b
Point b: Produces 120 mangos and 120 bananas. More bananas, fewer mangos.
Point a represents a combination where 150 mangos and 100 bananas are produced.
Point b represents a different combination with 120 mangos and 120 bananas.
Moving from point a to point b involves a trade-off: gaining 20 more bananas comes at the cost of producing 30 fewer mangos.
This illustrates the concept of opportunity cost — the loss of the next best alternative when a choice is made.
The curve is concave due to the law of increasing opportunity cost: as more bananas are produced, increasingly more mangos must be sacrificed.
Any point inside the curve would represent underutilization of resources, while points outside are currently unattainable.
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