Efficiency, Unemployment, and Growth on the PPC

A dot inside the PPC is a real economy in a recession: workers are unemployed, factories sit idle, resources exist but aren't fully used. Nothing stops the country from moving to a point on the curve except putting those idle resources back to work — no new technology or resources needed, just better use of what's already there. That is why a recession is drawn as a point inside the frontier rather than on it: potential output is higher than actual output.

A point outside the current PPC is impossible today, but it becomes reachable once the frontier itself shifts outward. That shift is growth, and it comes from more resources (more workers, more capital, newly discovered land) or better technology that lets existing resources produce more of everything. If an invention only speeds up shoe production, the frontier shifts outward along the shoe axis but stays put along the other good's axis, tilting the curve rather than pushing it out evenly.

Every point sitting on the curve is productively efficient: no resources are wasted, and producing more of one good requires giving up some of the other. But productive efficiency alone does not say which point is best. Allocative efficiency asks whether the specific mix of goods matches what society actually wants, and that depends on preferences, not on the shape of the curve. This connects directly to long-run aggregate supply: when the PPC shifts outward, the economy's maximum sustainable output rises, and that is exactly what a rightward shift of long-run aggregate supply represents.