The Production Possibility Curve (PPC)
  A PPC shows all the combinations of two 
   ‘goods’which can be provided if all 
   resources are being used efficiently
      The Production Possibility Curve (PPC)
                                                 USE 1. Showing Choices
                                                 This PPC shows all the 
                                                 combinations of Kidney Cancer 
                                                 Treatments and other health 
               HC                                care services available in the 
          esvic                                  economy.
          er                                     The NHS can provide KC kidney 
          e s                  A                 care treatments and no other 
          arc  HCA                               services, HC other services and 
          th l                                   no kidney treatment 
                                                 or any of the combinations in 
          r hea                                  between such as A where HCA
          he                                     health care services and KCA
          Ot                                     kidney treatments are provided.
                                                   PPC
                             KCA                    KC
                                                 Kidney Cancer Treatment
             The Production Possibility Curve 
                                           (PPC)
                                          USE 2. Opportunity costs can be illustrated.
                                          If the NHS reallocates its resources (moving along the 
                  HC                      PPC from A to B) it can produce more kidney cancer 
                es                        care but only at the expense of fewer other health 
                vicer             A       care services. 
                e sHC0                              The opportunity cost of producing more KC 
                arc                                 is the sacrifice of the other services. This can 
                th l                                be labelled on the diagram.
                                                 B            Opportunity cost of KC1 kidney 
                r heaHC1
                he                                            treatments rather than KC0 is the 
                Ot                                            loss of HC0-HC1 other services.
                                                          PPC
                                KC0            KC1              KC
                                                                         Kidney Cancer Treatment
                                           If the country is at 
                                           If it reallocates its 
                                            If it devotes all 
                                           point A on the PPF It 
                                           resources (moving round 
                                            Assume a country 
     Capital Goods                          resources to capital 
                                           the PPF from A to B) it can 
                                           can produce the 
                                            goods it could 
                                            can produce two 
                                           produce more consumer 
                                           combination of Yo 
             Ym                             produce a maximum 
                                            types of goods 
                                           goods but only at the 
                                           capital goods and Xo 
                                            of Ym.
                                            with its resources 
                                           expense of fewer capital 
                                           consumer goods
                                           goods. The opportunity 
                                            –capital goods 
                                    A       If it devotes all its 
             Yo                            cost of producing an extra 
                                            and consumer 
                                            resources to 
                                           X1-X0consumer goods is 
                                            consumer goods it 
                                            goods
                                           Y0–Y1 capital goods.
                                            could produce a 
                                            maximum of Xm
              Y1                          B
                                  Xo     X1 Xm Consumer Goods