Define Production Possibility Curve and state its properties. - Vidyadip

Question

Define Production Possibility Curve and state its properties.

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Answer

Production possibility curve is a curve which depicts all possible combinations of two goods which can be produced with given resources and technology in an economy.Properties of Production Possibility Curve:

PC is downward sloping: The downward slope of PPC means if the country wants to produce more of one good, it has to produce less quantity of the other goods.
PPC is concave to the point of origin: Concave shape of PPC implies that the slope of PPC increases. Slope of PPC is defin ed as the quantity of goods Y given up in exchange for additional unit of goods X.

[Slope of Production Possibility Curve]
$=\frac{\Delta\text{Y}}{\Delta\text{X}}=\frac{\text{Amount Of Good Y lost}}{\text{Amount Of Good X goined}}$
[Slope of PPC] = MRT = [Marginal Opportunity Cost]

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