#Production possibilities curve how to#

This growth would be represented in a PPC graph as a shift outward of the entire PPC curve. In this particular example, it would be when the owner decides to buy more land or a better technology suitable for tomato production. Real economic growth is when there is an increase in resources. Any point outside the boundary line of the production possibility curve will represent an unattainable combination of the output of the two goods with the present resources. The graphic representation of these two products will form a curve illustrating the different possibilities of production with the given resources and technology. If more of one good is produced then less of the other will be produced. If one decides to produce both goods then various combinations of goods can be produced. In simpler terms Opportunity costs are expressed in terms of how much of another good, service, or activity must be given up in order to pursue or produce another activity or good.

This opportunity cost varies based on resources, demand, and the product itself, so each company and economy must decide the best combination based on these factors. This is known as the opportunity cost required to produce tomatoes on the same land. So now we know that for every 1 tonne of tomato production, 2 tons of wheat could have been produced. More Wheat can be produced because the land is more suitable for wheat production. If all the resources are used for the production of tomatoes alone, then let us say that 50 thousand tonnes of tomatoes can be produced. If the given resources are used for the production of wheat alone, then let us say that 100 thousand tonnes of wheat can be produced. Let us consider two goods – Wheat and Tomato Though in reality, these resources are not fully used. The assumption is that all the resources are used productively and with complete efficiency. The technology or the techniques of production are also assumed to be constant. The resources are assumed to be fixed or stay constant. Assumptions of the PPC :Īs per the PPC, the country’s or company’s economy is assumed to have only two goods. It slopes downwards because of the few units we sacrifice for the others, as there exists an inverse relationship between the change in the quantity of one commodity and the change in the quantity of the other commodities. It is concave-shaped because more and more units of one commodity are sacrificed to gain an additional unit of another commodity. It is concave and slopes downwards to the point of origin.

#Production possibilities curve how to#

Countries and companies can use it to decide how to effectively and efficiently allocate resources to achieve maximum resource efficiency and to generate the most profitable product mix. What that means is a company or a country is able to produce more of one good only if it produces less of another. Thus it’s imperative to compare goods that utilize the same resources because the PPC illustrates that as “production of one good increases, production of the other good must decrease due to scarce resources”. Although one can graph ’Wheat’ production against ‘Tomato’ production since both require land to get produced. One cannot Graph ‘Television’ against ’Wheat’ production cause both goods are made from different resources. By graphing the PPC, one can easily determine whether the resources are being used efficiently or not. The PPC is drawn to illustrate all possible combinations of two goods that can be produced within the limitation of scarce resources. SSC CGL Prelims Quantitative Aptitude Question Paper 2021.Nehru’s Report - Gulf Between Congress and Muslim League.Advanced Level Inequality Questions for Bank and SSC Exams.Order and Ranking : Concepts, Questions, Solved Examples.Different Types of Seating Arrangement Questions.SBI PO Prelims Reasoning Question Paper 2019.Why Was Right to Property Removed From Fundamental Rights?.

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