Scribd
Upload
45 views8 pages

Production Possibility Curve: Presented by Ayanna, Shailja and Arshiya

The Production Possibility Curve (PPC) illustrates the maximum combinations of two categories of goods that can be produced in an economy given limited resources, highlighting opportunity costs and productive capacity. Points on the curve indicate efficient resource use, while points inside signify inefficiency, and points outside are unattainable. Shifts in the PPC can indicate economic growth (outward shift) or decline (inward shift) based on changes in the quality or quantity of production factors.

Uploaded by

abhinav.sharma2009
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
45 views8 pages

Production Possibility Curve: Presented by Ayanna, Shailja and Arshiya

The Production Possibility Curve (PPC) illustrates the maximum combinations of two categories of goods that can be produced in an economy given limited resources, highlighting opportunity costs and productive capacity. Points on the curve indicate efficient resource use, while points inside signify inefficiency, and points outside are unattainable. Shifts in the PPC can indicate economic growth (outward shift) or decline (inward shift) based on changes in the quality or quantity of production factors.

Uploaded by

abhinav.sharma2009
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Production

Possibility
Curve
Presented by Ayanna, Shailja
and Arshiya
The increased amount of
consumer goods is

Production produced at the expense


of capital goods

Possibility Curve A

A production possibility curve shows the

Capital
Goods
maximum combination of any two categories
of goods and services that can be produced in W B
an economy at any point of time according to
their limited resources. 1
W C
A PPC can help show the opportunity cost. 2
A PPC also shows the productive capacity of D
an economy Y Y
1 2
Consumer
Goods
All resources should

01. be used, there

Requirements shouldn’t
unemployment
be any
of

to be on PPC factors of production

For a country or economy to be on


There should be
the PPC, two conditions have to be

02.
efficiency in the use of
met. Also, the curve must touch
resources. Factors of
the X and Y axis, otherwise the
production should be
maximum combinations won’t be
allocated to their best
fulfi lled
use/purpose.
Production
Points A

Olive Oil
If the point is inside the curve, it
means the resources are inefficient/idle
W B
and factors of production are
unemployed. Like point E 1
W C
If the point is on the curve, the 2 E
resources are efficient and being used
to its maximum. Like point A,B,C and D D
Y Y
If the point is outside the curve, there’s 1 2
Cars
a lack of resources and it’s
unattainable. Like point F
Movement along
the PPC

Agricultural goods
A movement along the PPC occurs when
resources are reallocated.
B
A movement along the PPC results in an
W
opportunity cost. 1
W C
To increase the quantity of production of 2
one product, the quantity of the other
product must decrease.
Y Y
In the example, the movement from 1 2
point B to point C shows that more
Consumer
Consumer Goods are being produced, Goods
but at the expense of Agricultural goods
Shifts in a PPC
Outward Shift
A country’s growing or shrinking economy can be
shown through shifts in a PPC graph. An outward
shift would show that the country is facing
economic growth as there is more output of
goods and services and resources are being
used.

Capital
Goods
Causes of an Outward Shift
Causes of an outward shift go as follows:
• There could be an increase in the quality of
factors of production, such as : more highly
skilled labour achieved through investment in
education, research and training.
• There could be an increase in the quantity of
the factors of production, such as : the
Consumer
discovery of new resources, the reclamation
of land, or net migration of labour into our Goods
country.
Shifts in a PPC
Inward Shift
By contrast, there could also be an inward shift in the
PPC graph which would show the detrimental changes

Capital
Goods
in the economy of a country. It represents a decrease
in the productive capacity of the economy.

Causes of an Inward Shift


Some examples for the cause of an inward shift in a
PPC are :
• There could be a natural disaster such as a
powerful storm or a volcano etc.
• Or there could be a war that ends up destroying a Consumer
large proportion of the country’s farmland,
factories and infrastructure. Goods

You might also like