What Is Meant By Production Possibility Curve?

by | Last updated on January 24, 2024

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In business analysis, the production possibility frontier (PPF) is

a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources

. The PPF demonstrates that the production of one commodity may increase only if the production of the other commodity decreases.

What is production possibility curve with example?

In economics, the production possibilities curve is

a visualization that demonstrates the most efficient production of a pair of goods

. Each point on the curve shows how much of each good will be produced when resources shift to making more of one good and less of another.

What is meant by production possibility curve Class 11?

Production possibility curve shows

all different attainable combinations of the production of two commodities that can be produced in an economy with given the resources and technology

which are to be fully utilized.

What is production possibility curve explain with diagram?

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. But since they are scarce, a choice has to be made between the alternative goods that can be produced.

What do you mean by production possibilities?

Answer: Production possibilities of an economy refer

to different combinations of goods and services which an economy can produce from a given amount of resources and a given stock of technology

.

What are the 4 assumptions of PPC?

The four key assumptions underlying production possibilities analysis are: (1) resources are used to produce one or both of only two goods, (2) the quantities of the resources do not change, (3) technology and production techniques do not change, and

(4) resources are used in a technically efficient way.

Why is production possibility curve concave Class 11?

Production Possibility Curve is concave to the origin because

to produce each additional unit of good X, more and more unit of good Y is to be sacrificed

. Opportunity cost of producing every additional unit of good A tends to increase in terms of the loss of production of good Y.

What are the uses of production possibility curve?

The Production Possibilities Curve (PPC) is a

model used to show the tradeoffs associated with allocating resources between the production of two goods

. The PPC can be used to illustrate the concepts of scarcity, opportunity cost, efficiency, inefficiency, , and contractions.

What are the features of production possibility curve?

  • Slopes downwards to the right: PPC slopes downwards from left to right. …
  • Concave to the point of origin: It is because to produce each additional unit of commodity A, more and more units of commodity B will have to be sacrificed.

What are the four factors of production?

Economists divide the factors of production into four categories:

land, labor, capital, and entrepreneurship

. The first factor of production is land, but this includes any natural resource used to produce goods and services. This includes not just land, but anything that comes from the land.

Why is PPC concave explain?

Production Possibility Curve (PPC) is concave to the

origin because of the increasing opportunity cost

. As we move down along the PPC, to produce each additional unit of one good, more and more units of other good need to be sacrificed. … And this causes the concave shape of PPC.

What is another name for the production possibilities curve?

The PPF is also referred to as the production possibility curve or

the transformation curve

.

Why is PPC called opportunity cost?

Production Possibility Curve is called the opportunity cost curve as it is the

curve which shows the combinations of two goods and services that can be produced with fuller utilisation of a given amount of resources in the most efficient way and with a given production technology

. … PPC is concave to origin.

Which is the basic production function?

A production function relates the input of factors of production to the output of goods. In the basic production function inputs are

typically capital and labor

, though more expansive and complex production functions may include other variables such as land or natural resources.

Ahmed Ali
Author
Ahmed Ali
Ahmed Ali is a financial analyst with over 15 years of experience in the finance industry. He has worked for major banks and investment firms, and has a wealth of knowledge on investing, real estate, and tax planning. Ahmed is also an advocate for financial literacy and education.