State two properties of production possibility curve
Answers
The curve which shows the combinations of two goods and services that can be produced with fuller utilisation of a given amount of resources in the most efficient way and with a given production technology is called Production Possibility Curve. It is also known as Production Possibility Frontier (or PPF) and Transformation Curve. The following are the properties of a PPC.
i. Concave to Origin: PPC curve is concave to the origin. This is because of the increasing opportunity cost i.e. in accordance with the law of increasing opportunity cost.
ii. Increasing Marginal Rate of Transformation: The slope of PPC (MRT) shows, for the production of every additional unit of one good, more and more units of other good has to be sacrificed. In other words, as we move down along the PPC, the slope of PPC (or MRT) increases.
iii. Downward Sloping: PPC curve is downward sloping as more production of one good is associated with the decline in production of the other good.
iv. Optimum utilisation of resources: The points that lie on the Production Possibility Frontier are associated with full employment of resources and efficient utilisation of the available technology.
The are two characteristics of the PPC or the production possibility curve. These are:
✨ ✨ ✨ ✨ ✨
1. The PPC slopes downward: The PPC is a downward sloping curve. This is because the resources and technology are given or unchangeable hence to produce more of a good you have to forego the other good. E.g., In one hector of land two crops i.e., rice and wheat is produced. Now to increase the production of rice in the same land you need to forego some or more amount of wheat in order to grow rice. For this reason PPC is downward sloping.
2. The PPC is concave to the origin: This happens because in order to produce more and more of a good more and more of the other goods must be forgone. E.g, take the same example which I mentioned in the above list,the rice and the wheat. To produce more and more of rice you need to forgo more and more wheat beacuse the land which was suited for wheat production will not be equally suited for rice production. Hence for this reason PPC is concave to the origin.
HOPE IT HELPS YOU
⋆ ✢ ✥ ✦ ✧ ❂ ❉ ✱ ✲ ✴ ✵ ✶ ✷ ✸ ❇ ✹ ✺ ✻ ✼ ❈ ✮ ✡