Definition: Production possibility frontier is the graph which indicates the various production possibilities of two commodities when resources are fixed. The production of one commodity can only be increased by sacrificing the production of the other commodity.
What do you mean by production possibility?
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 two assumptions of PPC?
The production possibility curve is based on the following Assumptions: (1) Only two goods X (consumer goods) and Y (capital goods) are produced in different proportions in the economy. (2) The same resources can be used to produce either or both of the two goods and can be shifted freely between them.
Why is production possibility curve concave Class 11?
Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity are sacrificed that results in increasing marginal opportunity cost which leads to the concave shape of the production possibility curve.
What is the definition of the production possibility curve?
As per the production possibilities curve definition, it is a graphical representation of all possible combinations of any two specific goods which can be produced in an economy. Further, the analytical tool explains and addresses the problem of choice that allows producers to solve them effectively.
Which is an example of a production possibility?
Nonetheless, as per assumptions, the economy must produce both commodities, thus giving rise to production possibilities like B, C and D accordingly. As per the schedule, in case of B – an economy can produce 100 kg of butter and 230 kg of sugar.
What is the meaning of the production possibilities frontier?
The Production Possibilities Frontier (PPF) is a graph that shows all the different combinations of output of two goods that can be produced using available resources and technology. The PPF captures the concepts of scarcity, choice, and tradeoffs. The shape of the PPF depends on whether there are increasing, decreasing, or constant costs.
How are production possibilities arranged in a graph?
The diagram or graph explains the units of goods that a company can produce if all the resources are utilised productively. Therefore, a single commodity’s maximum manufacturing probability is arranged on the X-axis and that of the other commodity on the Y-axis.
