•One good sacrificed for another

•Cannot have both

•The next best alternative that is given up to obtain the preferred item.

•If you choose to buy the computer the XBOX 360 is the opportunity cost.

•More of one good can be produced by making less of another good

•How trade-offs and opportunity costs are illustrated

•Shows all possible combinations of two or more goods or services that can be produced within a stated time period

1.Amount of resources and technology will not change during the period being studied

2. All natural, human, and capital resources are being used in the most efficient manner

•WHAT SHOULD BE PRODUCED AND WHAT SHOULD NOT BE PRODUCED

• Points that inside the curve (below) the curve means that resources are used inefficiently

• Outside or above the curve means a production impossiblilty

•According to the graph, is it more efficient to produce luxury cars or economy cars???

•With new technology or new resources PPC shifts to right