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A production possibility curve illustrating the concept of opportunity cost and the trade-offs between producing two goods: mangos and bananas.
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: Produces 150 mangos and 100 bananas. More mangos, fewer bananas.
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.
Explore other diagrams from the same unit to deepen your understanding
The fundamental diagram showing the relationship between demand and supply in a competitive market, determining equilibrium price and quantity.
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A PPC diagram showing different levels of production efficiency and economic feasibility using combinations of consumer and capital goods.
A model illustrating how money, goods, services, and resources flow between households, firms, the government, the financial sector, and the foreign sector in an economy.
A refined circular flow model highlighting the roles of injections and withdrawals in determining national income and economic equilibrium.
A diagram illustrating consumer surplus and producer surplus in a competitive market, showing the benefits to buyers and sellers at the market equilibrium.
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