Cambridge IGCSE Economics 0455
Syllabus points
- Define a production possibility curve (PPC).
- Interpret points on, inside and outside the curve.
- Use the PPC to show opportunity cost, unemployment and economic growth.
What a PPC shows
A production possibility curve (PPC) shows the maximum combinations of two goods (or two types of good) an economy can produce when all its resources are used fully and efficiently. Draw two axes — for example capital goods and consumer goods — joined by a curve.
| Point | Meaning |
|---|---|
| On the curve | Efficient — all resources fully used. |
| Inside the curve | Inefficient — some resources unemployed or wasted. |
| Outside the curve | Currently unattainable with existing resources. |
Key definitions
| Term | Definition |
|---|---|
| PPC | A curve showing the maximum output combinations of two goods using all resources efficiently. |
| Economic growth | An increase in an economy's productive capacity, shown by an outward shift of the PPC. |
The PPC and opportunity cost
Moving along the curve from one point to another means producing more of one good and less of the other — this shows opportunity cost. Because resources are not equally suited to both uses, the curve is usually drawn bowing outwards (opportunity cost rises as you specialise).
Shifts of the PPC
- An outward shift shows economic growth — caused by more resources (labour, investment) or better technology.
- An inward shift shows a fall in capacity — from a natural disaster, war or a shrinking workforce.
Point inside the PPC → unemployment/inefficiency; whole curve shifts out → economic growth.
Worked example
An economy currently produces at a point inside its PPC — some workers are unemployed. If the government reduces unemployment, production moves *towards* the curve (using existing resources better), without any shift. If instead the economy invests in new factories and training, the whole curve shifts outward, raising the maximum it can ever produce.
Common exam mistakes
- Saying a point inside the curve is "impossible" (it is inefficient, not impossible).
- Confusing a movement along the curve (opportunity cost) with a shift (growth).
- Forgetting to label the axes with two specific goods.
Exam technique
Label axes clearly, mark the relevant point, and state exactly what it shows (efficiency, spare capacity or growth). Use the PPC to *illustrate* opportunity cost and growth in extended answers.
Quick revision
- On curve = efficient; inside = spare capacity; outside = unattainable.
- Movement along = opportunity cost; outward shift = economic growth.