Explain the main economic problems with the help of the concept of production possibility curve and opportunity cost.
Answers
Explanation:
Opportunity cost can be illustrated by using production possibility frontiers (PPFs) which provide a simple, yet powerful tool to illustrate the effects of making an economic choice. A PPF shows all the possible combinations of two goods, or two options available at one point in time.
Answer:
The central problems of economy can be very well explained with the help of Production Possibility Curve (PPC). The PPC is an analytical tool which is used to illustrate the problem of choice. So first, we will explain the concept of PPC. Production Possibility Curve (PPC) : A production possibility curve is a curve which shows the various alternative production possibilities which can be produced with given resources and techniques of production. We know that there is a maximum limit which can be produced with given resources and techniques of production. In this situation, if we want to increase the production of a particular commodity, then we will have to reduce the production of some other commodity. This is why, production possibility curve is also known as Transformation Curve. In Order to Understand PPC, Let Us Assume That There are Two Types of Goods – Wheat and Mustard which are to be produced. We also assume that there is a given amount of productive resources and they remain fixed resources are neither unemployed nor underemployed and technology does not change. Now consider the following table: