Figure 1-2 A Production Possibilities Boundary
resources are being used efficiently, producing more of one good requires
producing less of others.
The negatively sloped boundary shows the combinations that are
attainable when all resources are used efficiently. The production
possibilities boundary separates the attainable combinations of goods,
such as a, b, c, and d, from unattainable combinations, such as e and f
Points a, b, and c represent full and efficient use of society’s resources.
Point d represents either inefficient use of resources or failure to use all
the available resources. If production changes from point a to point b
opportunity cost is involved. The opportunity cost of producing more
consumption goods is the necessary reduction in the production of
investment goods equal to.
A production possibilities boundary illustrates three concepts: scarcity, choice, and
opportunity cost. Scarcity is indicated by the unattainable combinations outside the boundary;
choice, by the need to choose among the alternative attainable points along the boundary; and
opportunity cost, by the negative slope of the boundary.Δx
Δy