Cambridge International as and a level Economics Ebook

Economic growth: 
represented by a shift outwards of the 
production possibility curve.
KEY TERM
Th
e production possibilities could also have declined. Th
is 
could be because in some way the resources available to the 
economy have declined. Perhaps some of the economy’s 
natural resources have become exhausted or the working 
population is falling. It might also be because the available 
technology has changed. An example might be the 
impact of controls on carbon emissions, which will aff ect 
production possibilities as controls become more rigorous.
TOP TIP
With a production possibility curve, the only eff icient 
points are on the production possibility curve itself; a 
point inside the production possibility curve is ineff icient.
Figure 1.9 
Shift s in production possibility curves
Manufactured products
Agricultural pr
oducts
ppc
2
ppc
1
1000
700
700
1000
700
500
500
0
0
Manufactured products
Agricultural pr
oducts
ppc
4
ppc
3
(b)
(a)
Figure 1.8 
A production possibility curve with constant 
opportunity costs
Manufactured Products
a
0
50
100
100
Agricultural Products
50
29
Chapter 1: Basic economic ideas and resource allocation

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Making use of production possibility curves
We can use production possibility curves to show some 
of the issues facing economic decision-makers in the 
real world.
Current consumption or future economic growth?
As stated previously, the production possibilities open to 
an economy are determined by the quantity and quality 
of resources available. In the process of production, 
resources are used up and they need to be replaced 
if production possibilities are to be maintained. Th
e 
terms