What's the connection between the PPC and the AD/AS model?

Both the PPC and AD/AS model demonstrate an economy and show a potential output as well as a real output. A shift in LRAS in the AD/AS model shows that the potential output of a nation increases as a result of increased efficiency or quantity/quality of factors of production. In the same way a PPC can move outwards and demonstrate the same thing. Changes in real GDP are shown in the AD/AS model as shifts of the SRAS curve and in the PPC as a movement of an indicator showing the situation of the economy. So essentially both models show the same thing. Then again, PPC is a highly theoretical model, because in real life there are more than two different goods that a country produces. AD/AS doesn't indicate what is being produced, and it shows shifts in both aggregate supply & demand and how it affects inflation.

SK
Answered by Sara K. Economics tutor

14366 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

What is productive efficiency?


Why should the government consider the price elasticity of demand when imposing tax on goods?


Why might expansionary demand side policies not always be effective in promoting economic growth?


What is the main government objectives to maximize economic growth?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2025 by IXL Learning