Define production possibility curve.

The production possibility curve (PPC) is a graphical representation that shows the maximum combinations of two goods or services that an economy can produce with its available resources and technology, assuming full employment and efficiency. It illustrates the concept of trade-offs—when an economy produces more of one good, it must sacrifice the production of another good.

The PPC is typically a downward-sloping curve (concave to the origin), indicating an opportunity cost for shifting resources between goods. Points on the curve represent efficient production, points inside indicate underutilization of resources, and points outside are unattainable with current resources.

Key assumptions:

• Fixed resources and technology.
• Full employment of resources.
• Two goods only (for simplicity).
• Constant opportunity cost (linear PPC) or increasing opportunity cost (concave PPC).