By , 6 months ago

The production possibility curves is a hypothetical
representation of the amount of two different goods that can be obtained
by shifting resources from the production of one, to the production of
the other. The curve is used to describe a society’s choice between
two different goods. Figure
1, shows the two goods as consumption and investment. Investment
goods are goods that are involved in the production of further consumption
goods. They include physical
capital such as machines, buildings, roads etc. and human investments such
as education and training. The sums of all investments make up the capital
stock of a society. To show the point where all resources were used to
produce consumption goods, one should move straight up the vertical axes
to the curve. To show the
point were all resources were used to produce investment goods, one should
move straight on the horizontal axes to the curve. Both
points are extreme and unrealistic. Both
points A and B represented more realistic combinations, with point A showing
more consumption and less investment, while point B shows more investment
and less consumption.