Production Possibilities
High School
Definition
A model showing the maximum combinations of two goods an economy can produce with its resources. It illustrates scarcity, trade-offs, and opportunity cost, since making more of one good means making less of another.
Worked examples
An economy can produce either 100 cars and 0 computers, or 0 cars and 50 computers, or any combination in between like 60 cars and 20 computers.
Each point shows a possible maximum output mix; the curve connects all efficient combinations.
Moving from 20 computers to 30 computers requires giving up 15 cars because resources shift to computer production.
The trade-off illustrates opportunity cost: more of one good means less of the other.
Common mistakes
- Points inside the curve are impossible to reach → Points inside the curve are possible but inefficient; points outside are impossible Inside means wasted resources; outside exceeds current capacity.
- The curve shows what an economy actually produces → The curve shows maximum possible production, not actual output It represents potential, not reality; actual production may fall short due to unemployment or inefficiency.
- A straight-line PPC means resources are specialized → A straight-line PPC means constant opportunity cost; a bowed-out curve reflects specialization Bowed curves show that some resources are better suited to one good than the other.
Where you'll use it next
Production possibilities underpin supply and demand analysis, comparative advantage and trade theory, and discussions of economic growth, efficiency, and policy choices in economics courses.
See also
Reviewed by Pat Cheng, M.Ed. — StudyPug Curriculum Lead · Last updated June 6, 2026