ECON102: Principles of Macroeconomics

Watch this video for a graphical representation of opportunity cost on the production possibilities curve. As the video shows, a point inside the curve shows that resources are not being used efficiently. These are points of inefficiency. Any point outside the curve represents a point beyond our grasp but could be attained with more resources and technology.

Any point on the production possibilities curve is a point of efficiency; any movement up or down the curve represents changes in production. As you obtain more of one good, you have to give more of the other good, which is why opportunity cost is represented by moving along the curve itself.