Production possibility Curve/ Frontier (PPC/ PPF):
The concept of PPC was illuminated by P.A Samuelson for the first time. Professor Samuelson says, " A full employment economy must always in producing one good be giving up something of another. Substitution is the law of life in a full employment economy. The production possibility frontier depicts society's menu of choices."This curve is used as a tool to analyze the problem of choice of wants and scarcity of resources. It shows the ratios of different goods and services to be produced with the use of given limited resources.
Assumptions:
1) Only two goods are produced in an economy.
2) The factor of productions is fixed.
3) There is full employment of resources.
4) Production Technology is given and constant.
5) PPC runs in a short period.
PPC is a graph that shows various combinations of the amount of two commodities that an economy can produce per unit of time such as the number of shoes versus kilograms of butter. The table and diagram are given below to clarify about PPC.
Possibilities | Butter (Kilograms) | Shoes ( Pairs) |
A | 0 | 10 |
B | 1 | 9 |
C | 2 | 7 |
D | 3 | 4 |
E | 4 | 0 |
When all the possibilities are connected, then we get a concave nature of curve which is known as Production Possibility Curve. The points F and G are inefficient points because they are unattainable due to limited resources and given technology. To produce at this point, the economy requires more resources or improved technology.
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