Production Possibility Curve
Production Possibility Curve
A Production Possibility Curve, also known as Production Possibility Frontier or a PPC is a graphical representation of all possible combinations of amounts of two goods which an economy can produce using its limited resources and available technology.
Example:-Table 1
.If all the resources are used in the production of corn, the maximum amount of corn that can be produced is 4 units and if all resources are used in the production of cotton, at the most, 10 units of cotton can be produced.The economy can also produce1 unit of corn and 9 units of cotton or 2 units of corn and 7 units of cotton or 3 units of corn and 4 units of cotton. There can be many other possibilities. The figure illustrates the production possibilities of the economy. Any point on or below the curve represents a combination of corn and cotton that can be produced with the economy’s resources. The curve gives the maximum amount of corn that can be produced in the economy for any given amount of cotton and vice-versa. This curve is called the production possibility.
A Production Possibility Curve, also known as Production Possibility Frontier or a PPC is a graphical representation of all possible combinations of amounts of two goods which an economy can produce using its limited resources and available technology.
Example:-Table 1
.If all the resources are used in the production of corn, the maximum amount of corn that can be produced is 4 units and if all resources are used in the production of cotton, at the most, 10 units of cotton can be produced.The economy can also produce1 unit of corn and 9 units of cotton or 2 units of corn and 7 units of cotton or 3 units of corn and 4 units of cotton. There can be many other possibilities. The figure illustrates the production possibilities of the economy. Any point on or below the curve represents a combination of corn and cotton that can be produced with the economy’s resources. The curve gives the maximum amount of corn that can be produced in the economy for any given amount of cotton and vice-versa. This curve is called the production possibility.
The production possibility frontier gives the combinations of corn and cotton that can be produced when the resources of the economy are fully utilised. Note that a point lying strictly below the production possibility frontier represents a combination of corn and cotton that will be produced when all or some of the resources are either underemployed or are utilised in a wasteful fashion
If more of the scarce resources are used in the production of corn,less resources are available for the production of cotton and vice versa.Therefore, if we want to have more of one of the goods, we will have less of the other good. Thus, there is always a cost of having a little more of one good in terms of the amount of the other good that has to be forgone.This is known as the opportunity costa of an additional unit of the goods.
Every economy has to choose one of the many possibilities that it has.In other words, one of the central problems of the economy is to choose from one of the many production possibilities.
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