Production Possibility Curve (PPC)
Production Possibility Curve
represents the combination of two products produced with definite amount of
wealth and current technology. This is
known as PPC curve. As want is infinite and due to limited restriction of
wealth we can’t meet all of our want at the same time. We can know how much
product is needed in a society with current wealth and technology by the aid of
PPC curve. The solution of scarcity and necessary want selection can be gained
through PPC curve. We can represent the PPC curve graphically:
In this graph, AB represents the PPC
curve. At point A the production of X is zero and at point B the production of
Y is zero. Within A and B the production of both products are indicated. For
example:
At point P,
Y= OY1,
X=OX1
At point Q,
Y= OY2,
X=OX2 and
At point R,
Y= OY3,
X=OX1
Hence, the PPC curve is formed with
A, P, Q, R and B points respectively.
NB: Any points under AB curve; as
like in S production is possible but the factors of production will be unused.
Again, due to factors of production constraints; beyond AB curve; for example: at
point M production is not possible.
The Characteristics of PPC curve:
1
PPC
curve represents how much products can produce with current wealth and technology
in any society.
2 PPC
represents the combination of two products.
3 PPC
express what type of product production will increase and decrease the
production in the same plot of land.
4 Opportunity
cost theory can be explained by PPC curve.