PPCs+-+Consumer+vs.+Capital+Goods

PPCs- Consumer vs. Capital Goods A production possibilities curve shows the possible amounts of capital and consumer goods that can be produced, while maintaining economic efficiency. The curve itself is sometimes called the production possibilities frontier. Points inside the curve are attainable, but inefficient. Points outside the curve are desirable, but unattainable. An increase in technology or resources will cause the curve to shift outwards, whereas a decrease in resources will cause the curve to shift inwards.

PPC's are graphed with consumer goods on one axis and capital goods on the other axis. The bowed out curve illustrates the increasing opportunity costs as one type of good is given up in favor of another. A greater production of capital goods will lead to greater overall production in the future. Benefits of greater consumer good production are not long lasting.

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http://www.netmba.com/econ/micro/production/possibility/ http://faculty.mc3.edu/kbaird/ProductionPossibilitiesCurve/sld001.htm http://en.wikipedia.org/wiki/Production_possibilities_curve

Sample Problem: If you want to produce more consumer goods, you must A. Produce more capital goods B. Produce the same amount of capital goods C. Produce less capital goods D. Produce no capital goods

The correct answer is C