CBSE & NCERT Class 12 Economics Notes Production Possibility Curve
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Production Possibility Curve:A Production Possibility Curve, also known as Production Possibility Frontier or a PPC is a graphical representation of all possible combinations of amounts of two goods which an economy can produce using its limited resources and available technology.
This is the point at which an economy, most efficiently producing its goods and services by allocating its resources in the best possible manner
SHAPE OF PPC
The shape of PPC is concave to the origin. This is because of increasing marginal opportunity cost. The law of increasing marginal opportunity cost states that for producing every additional unit of Good X, more and more units of Good Y are to be sacrificed. The PPC is downward sloping from left to right. This is because the production of one good can be increased only by sacrificing some units of the other good since the economy has limited resources. However, a PPC is convex to the origin when MOC is diminishing and is represented by a straight line when MOC is constant
Any point lying on the PPC depicts that the economy is fully and efficiently utilising its limited resources. When the PPC shifts to the left or any point within PPC shows underutilisation of resources. This means that the economy isn’t utilising its limited resources judiciously. On the other hand, points lying outside PPC or a rightward shift in the Production Possibility Curve show growth of resources which may take place due to advancement in technology and is an unattainable situation.
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