what is ppc? How can ppc be solved?
Answers
Answer:
Explanation:
Production possibility curve (PPC) is a curve which shows all the possible combinations of two goods that can be produced in the economy with a given amount of technology and resources. A PPC indicates the opportunity cost and allocative efficiency in the economy. It is also called production possibility frontier.
Solving the central problems of the economy consists of answeing 3 basic questions:
What to produce?
How to produce?
For Whom to produce?
PPC provides the answer by determining the point the economy is operating on, so that steps can be taken to reach a desired point.
What to produce?
PPC helps to determine which goods or which types of goods are to be produced. For eg, if x axis shows necessary goods and y axis luxury goods, so depending on the conditions, a point can be selected to either produce more of one type of goods or the other. In real world, economy can decide whether to produce more of wheat or more of ACs. It also depends on factors such as social conditions, market conditions.
How to produce?
This is about the technique used for production. The technique should be such that resources are used fully and efficiently and economy operates on PPC and not under it. In India, labor intensive technique might seem more suitable for production of goods since labor is cheaper and abundantly available.
For Whom to produce?
This tells about the distribution of goods and service and disposition of income generated from sale of goods and services. The income generated should be distributed among the factors of production in such a way that basic needs of every factor is satisfied to the maximum possible extent. In India, since there are wide income inequality gaps, the govt. tries to employ its resources for production of goods required by masses and not high end products.
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