Production possibility curve

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Production possibility curve

The productive resources of the community can be used for the production of various alternative goods. But since they are scarce, a choice has to be made between the alternative goods that can be produced.

In other words, the economy has to choose which goods to produce and in what quantities. If it is decided to produce more of certain goods, the production of certain other goods has to be curtailed.

Let us suppose that the economy can produce two commodities, cotton and wheat. We suppose that the productive resources are being fully utilized and there is no change in technology. The following table gives the various production possibilities.

It all available resources are employed for the production of wheat, 15, quintals of it can be produced. If, on the other hand, all available resources are utilized for the production of cotton, quintals are produced.

These are the two extremes represented by A and F and in between them are the situations represented by B, C, D and E. At B, the economy can produce 14, quintals of wheat and quintals of cotton.

Production possibility curve

At C the production possibilities are 12, quintals of wheat and u quintals of cotton, as we move from A to F, we give up some units of wheat for some units of cotton For instance, moving from A to B, we sacrifice quintals of wheat to produce quintals of cotton, and so on.

As we move from A to F, we sacrifice increasing amounts of cotton. This means that, in a full-employment economy, more and more of one good can be obtained only by reducing the production of another good. The following diagram In this diagram AF is the production possibility curve, also called or the production possibility frontier, which shows the various combinations of the two goods which the economy can produce with a given amount of resources.

The production possibility curve is also called transformation curve, because when we move from one position to another, we are really transforming one good into another by shifting resources from one use to another.

It is to be remembered that all the points representing the various reduction possibilities must lie on the production possibility curve AF and not inside or outside of it. For example, the combined output of the two goods can neither be at U nor H.The production possibility curves is a hypothetical representation of the amount of two different goods that can be obtained by shifting resources from the production of one, to the production of the other.

The curve is used to describe a society’s choice between two different goods.

Production possibility curve

The answer is: a currently unattainable production This happen due to either lack of materials, labor or capital. production possibility curve create a graphical representation of the combinations of goods and services an economy can produce. IWe use production possibility curve in order to determine which amount of production would provide the best result for the economic growth/5(5).

Definition of production possibility curve: 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.

Definition of production possibility curve: 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.

A production possibility curve measures the maximum output of two goods using a fixed amount of input. The input is any combination of the four factors of rutadeltambor.com are land and other natural resources, labor, capital goods, and rutadeltambor.com manufacture of most goods requires a mix of all four.

The production possibility curve represents graphically alternative produc­tion possibilities open to an economy. The productive resources of the community can be used for the production of various alternative goods.

Production Possibility Frontier (PPF)