as a whole allocates its scarce resources—its land, labour, and capital—
between the production of various goods and services.
Production Possibilities Boundary
In particular, consider the choice that any country must face between
producing goods for final consumption (such as food and clothing) and
goods for investment purposes used to increase future production (such
as machines and factories). If resources are fully and efficiently employed
it is not possible to have more of both consumption and investment
goods. As the country devotes more resources to producing consumption
goods it must take resources away from producing investment goods. The
opportunity cost of the extra consumption goods is the value of the
investment goods forgone.
The choice is illustrated in Figure 1-2. Because resources are scarce,
some combinations—those that would require more than the total
available supply of resources for their production—cannot be attained.
The negatively sloped curve on the graph divides the combinations that
can be attained from those that cannot. Points above and to the right of
this curve cannot be attained because there are not enough resources,
points below and to the left of the curve can be attained without using all
of the available resources, and points on the curve can be attained only if
all the available resources are used efficiently. The curve is called the
production possibilities boundary (Sometimes “boundary” is replaced
with “curve” or “frontier.”) It has a negative slope because when all