villaswiss.blogg.se - Production possibility curve

#Production possibility curve full#

All points like A, B, C, D E, and F on the Production possibility curve indicates efficient utilization of resources. Any point above the production possibility curve shows the growth of resources. Any point below or inside the production possibility curve shows the underutilization of resources.

#Production possibility curve full#

Curve AF indicates the full employment of resources. Points B, C, D, and E based on the data given in the schedule gives the various combination of two goods. The economy can devote a part of its resources to the production of Rice and a part to the production of wheat. In between them, there are many other possibilities. If the economy decides to use all its resources in the production of wheat then the production of rice will not be possible. If the economy decides to use all its resources in the production of Rice, then the wheat cannot be produced.

Production Possibility Curve Indicates Efficient Utilization of Resources.ĭifferent points on the Production Possibility curve depicting different combinations of two goods are in fact choices that are open to society. Various possibilities of production of combination of Rice and Wheat in a hypothetical economy are illustrated in the following Production Possibility schedule and curve. The example of two goods is given to facilitate the problem of choosing otherwise same analysis applies to any choice of goods. Let us assume that with the given resources and technology an economy can produce only two goods, namely Wheat and Rice. Production possibility curve indicates various alternatives in the form of a combination of two goods that can be produced with full and efficient employment of given resources and available technology. Production Possibility Schedule and Curve

Production Possibility Curve is concave (curved inwards) to the origin.

It is downward sloping from left to right.

Production Possibility Curve has two characteristics:

Resources are not equally efficient in the production of all goods.

Given resources are used fully and efficiently.

Given technology remain constant and does not change.

Production Possibility Curve is drawn on the following four assumptions: Production Possibility Curve (PP Curve) also knows as Production Possibility Frontier represents different pairs or combinations of two goods that can be produced with an economy given technology and resources. Although it can be used to analyze any number of commodities, economists have simplified the analysis by presuming only two goods. It is very difficult to choose between hundreds and thousands of goods which can be produced from the same resources. The graph or curve showing the production possibility is called the Production Possibility Curve. Available resources can be used to produce various alternative goods which are known as production possibilities.

To increase the output of one product, we have to sacrifice or reduce the production of another product. It demands the diversion of some resources from producing one product to another product to increase the production of one particular goods or service.

Due to the characteristic feature of scarce resources having alternative uses, there is a maximum limit to the production of goods and services that an economy can produce with full and efficient use of available resources. It is essential to make a choice between alternative uses of available resources. Resources to satisfy human wants are not only limited but also have alternative uses. The production possibility curve is a curve that depicts all possible combinations of two goods that an economy can produce with available technology and with full and efficient use of its given resources.