Illustrates the possible combinations of goods or services produced by a single nation, business or person
PPC
The law of increasing opportunity costs is the concept that as you continue to increase production of one good, the opportunity cost of producing the next unit increases
Captures scarcity of resources and opportunity costs
Resources are usually not perfectly adaptable, so production doesn't change at a constant rate
Movement along a PPC curve
1. Shifting resources out of the production of one good and reallocating it to another good
2. Increases the production of good Y and decreases the production of good X
Economic growth
Technological improvements allow firms to produce the same amount of goods or services using less resources
Technological improvements allow firms to produce more goods and services using the same amount of resources
Technological improvements shift out the PPC
Developing economies (LEDCs)
Low- and middle-income countries, per capita income is low and standards of living are generally poor
Developed economies (MEDCs)
High-income countries, GDP per capita is high and there is widespread access to goods and services, and thus a high degree of economic prosperity
Tradeoffs
The process of deciding whether to give up some of one good in order to obtain more of another
