MODULE 3

The Production Possibilities Curve Model

In this Module, you will learn to:

• Explain the importance of tradeoff s in economic analysis

• Describe what the production possibilities curve model tells us about efficiency, opportunity cost, and economic growth

• Explain why increases in the availability of resources and improvements in technology are the two sources of economic growth

A good economic model can be a tremendous aid to understanding. In this module, we look at the production possibilities curve, a model that helps economists think about the trade-offs every economy faces. The production possibilities curve helps us understand three important aspects of the real economy: efficiency, opportunity cost, and economic growth.