Production Possibility Curve

PRODUCTION POSSIBILITY CURVE/TRANSFORMATION CURVE.

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4.Define Production Possibility Curve or Production Possibility Frontier or Transformation Curve?

Ans. Production Possibility Curve:- This curve shows possibilities of those different combinations of two or more goods which can be produced with the help of available resources and given technology.

Assumptions:-

1. Only two goods have been taken.

2. Technology is assumed constant.

3. Resources are kept equally efficient.

It can be explained with the help of schedule and diagram:-

Explaination:- In the above diagram good A is shown on x-axis and good Y is shown on y-axis. The points on the PPC shows the resources are being fully and efficiently utilised. The shape of the PPC is concave to origin.

5. Explain the Shift in PPC?

Ans:- There are two types of shift in PPC due to change in production of the goods because of the change in technology or resources in an economy.

Reasons for Rightward Shift:
1:- Improvement in technology.
2:- Increase in resources.
3:- Growth of GDP in an economy.

Reasons for Leftward Shift:
1:- Poor technology.
2:- Decrease in resources.
3:- Degrowth of  GDP in an economy.

6. What does the points related to the PPC shows.
Ans. The different points represent different things in PPC:-
a) Points on the PPC shows full utilisation of resources.
b) Points below the PPC shows underutilisation of resources.
c) Points above the PPC shows overutilisation of resources.

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