Question

Define production possibilities curve. State its two properties.

Answer 1

Answer:

This is a curve which shows the combination of 2 goods that can be produced with the fixed resources of technology assuming that resources are fully utilized.

Assumption:

1. Technology same.

2.There must be 2 goods.

3. Resources fully utilized.

Reason why it is done:

• to explain economic problem of a country (scare resources to give attain Maximum satisfaction)

Properties:

1. PPC slope downward from left to right because both the variables involve in the equation are inversely related as one increase then other one decreases and vice versa because the resources are constant.

2. PPC concave to origin Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost which leads to the concave shape of production possibility curve.

Answer 2

In Economics,Production Possibility Curve(PPC) is a graphical curve which illustrates various combinations of any two goods or commodities produced by any economy given a finite or limited amount of factors/inputs of production or productive resource endowments.

Explanation:

Properties of PPC:-

• The PPC slopes downward and moves from left to right implying that as the country increases the production of one good or commodity,the production of the other good or commodity decreases given a fixed or constant resource or factor endowment.
• The shape of PPC is concave to the origin indicating that as the country or economy increases the production of one good,it is dedicating most of the resources or factor endowments to the production of that particular good which could have been used to produce the other good as well.Hence,the country is sacrificing the opportunity to produce the other good under PPC,by allocating or specializing its factors or inputs of production to produce only one particular good or commodity.