production possibility curve characteristics

#PRODUCTION POSSIBILITY CURVE CHARACTERISTICS FULL#

Consequently, The opportunity cost of producing each additional unit of commodity-1 tends to increase the loss of production of commodity-2.

PPC is concave to the point of origin: It is because, to produce every additional unit of commodity-1, more and more units of commodity-2 will have to be sacrificed.

It implies, More of commodity-1 can be produced only with less of commodity-2.

#PRODUCTION POSSIBILITY CURVE CHARACTERISTICS FULL#

Because, at the situation of full utilization of given resources, the production of both goods cannot be increased.

Production Possibility curve slopes Downward: PPC curve slopes downward from left to right.

Production Possibility Curve has the following basic properties :

Furthermore, The area beyond this curve represents unattainable combinations and area inside the curve shows the inefficient utilization of resources. This curve is known as the Production Possibility or Transformation curve. By combining these points, we get AF curve. Lastly, Point F shows the production possibility of 250 units of butter and no milkshake. Similarly, points B, C, D and E show different combinations of butter and milkshake. Here, The first production possibility is 500 units of milkshake and no butter. In fig, the quantity of butter is shown on X-axis and milkshake on Y-axis. Graphical-Representation: Production Possibility Curve For instance, under ‘B’ combination, it is 450 units of milkshake and 50units of butter under ‘C’ combination, it is 360 units of milkshake and 100 units of butter under ‘D’ combination, it is 270 units of milkshake and 150 units of butter and under ‘E’ combination, it is 150 units of milkshake and 200 units of butter.

Besides these limits, there are many alternatives possibilities of production of milkshake and butter. On the other hand, if production is obtained under ‘F’ combination, then 250 units of butter will be produced without any production of milk-shake. The above schedule shows that if production is carried out under ‘A’ combination, then 500 units of Milk-shake alone will be produced without any production off butter. Moreover, If the producer produces both the goods, then within these limits, various combinations can be produced. On the other hand, if all the resources are used for the production of butter only, then 250 units of butter can be produced. If all the resources are used for making milkshake alone, then 500 bottles of milkshake can be produced. Suppose, a producer decides to produce only two goods namely, milkshake and butter with the available resource “cow’s milk” and given technology. For example, apples and wheat or capital goods and consumer goods. It is assumed there are only two goods or two sets of goods are produced in the economy.There is neither any improvement nor innovation in technology.The given resources are utilized fully and efficiently.They can be transferred from one use to another to some extent. The number of factors of production is given and assumed as fixed.“Production Possibility Curve is that curve which represents the maximum amount of a pair of goods or services that can be produced with an economy’s given resources and technique assuming that all resources are fully employed.” Assumptions : Unimax Publications Book’s Solution – PSEB.Usha Publication Book’s Solution – PSEB.

Production possibility curve characteristics