Graphically express a production possibilities curve. What do points on, inside and outside the curve represent? What does a rightward shift of the curve represent? How is economic growth expressed in terms of the production possibilities model?

Answer 1

The production possibilities curve will bow out from the origin. A point on the curve represents efficiency. A point inside represents inefficiency. A point outside the curve is currently unattainable (it is a combination of production we cannot currently produce given our limited resources and technology; although that point may be attainable if we acquire more resources, technology, or generally increase our production possibilities). A rightward shift in the curve represents an increase in production possibilities. Because economic growth means an increase in a nation's production possibilities over time, then it is expressed as a rightward shift of the production possibilities curve.