Guns And Butter Curve
Categories: Econ, Financial Theory
The guns and butter curve is a classic example demonstrating the tradeoffs being made on a production possibilities curve (PPC). The PPC reminds us we have limited resources, and that we can choose how to spend them. It puts one good on the x-axis and one on the y-axis, with each point representing a certain amount of each good produced. Anything produced on the PPC is efficient, while anything outside of it is not possible, and anything produced underneath it is inefficient.
Guns and butter became a classic example, because war (in decades past) was relatable, emphasizing the difficulty of the question: do we put more money toward military spending, or more toward food? How much butter are we willing to give up for each gun? If we want x amount of butter, that only leaves us with y amount of guns.
Oh, the dilemma. Economics is called the "dismal science" for a reason.