what is production possibility curve(PPC) and its characteristics
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A graphical representation of the alternative combinations of the amounts of two goods or services that an economy can produce by transferring resources from one good or service to the other. This curve helps in determining what quantity of a non essential good or a service an economy can afford to produce without jeopardizing the required production of an essential good or service. Also called transformation curve.
1. It Slopes Downwards to Right:
Production possibility curve slopes downwards to the right shows that economy has to forgo some quantity of one commodity to get more quantity of other commodity. In figure when the economy moves from combination B to C, economy has to give up two million quintals of wheat to get one million metres of additional cloth.
2. Concave to the Origin:
Production possibility curve is concave to the origin. It shows the operation of the law of increasing opportunity cost. In figure when we move from A to B, economy has to forgo one million quintals of wheat. Again when we move from B to C, economy is required to give up two million quintals of wheat to get one additional unit i.e. one million metres of cloth.
1. It Slopes Downwards to Right:
Production possibility curve slopes downwards to the right shows that economy has to forgo some quantity of one commodity to get more quantity of other commodity. In figure when the economy moves from combination B to C, economy has to give up two million quintals of wheat to get one million metres of additional cloth.
2. Concave to the Origin:
Production possibility curve is concave to the origin. It shows the operation of the law of increasing opportunity cost. In figure when we move from A to B, economy has to forgo one million quintals of wheat. Again when we move from B to C, economy is required to give up two million quintals of wheat to get one additional unit i.e. one million metres of cloth.
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