relative prices of the goods: that is, the relative price of two goods in the consumption choice budget constraint.

These tradeoffs appear as a straight line. However, a curved line represents the tradeoffs in many production

possibilities frontiers because the law of diminishing returns holds that as we add resources to an area, the marginal

gains tend to diminish. Regardless of the specific shape, tradeoffs remain.

The third theme is economic efficiency, or getting the most benefit from scarce resources. All choices on the

production possibilities frontier show productive efficiency because in such cases, there is no way to increase the

quantity of one good without decreasing the quantity of the other. Similarly, when an individual makes a choice

along a budget constraint, there is no way to increase the quantity of one good without decreasing the quantity of

the other. The choice on a production possibilities set that is socially preferred, or the choice on an individual’s
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