Such situations are known as unattainable combinations. This is shown by point D in the diagram given above. On the other hand, the economy cannot operate at any point outside the PPC as, with the given amount of resources, it is impossible for the economy to produce any combination more than the given possible combinations. Both of these situations are attainable combinations. If the resources are not utilised fully and efficiently, the economy will operate inside the PPC. This is shown by points A and B in the diagram given above. If the resources are fully utilised the economy may operate at any point on the PPC according to the amount of each good produced. The point on the PPC where the economy operates depends on how well the resources are utilised. The PPC shows the maximum available possibilities which an economy can produce. Operation of the Economy on the Production possibility Curve When all these points of different combinations of production of the two goods are joined, they form a Production Possibility Curve. To produce one more unit of Good X, less of Good Y can be produced. This means that more of one good can be produced by sacrificing the other. Similarly for X B amount of Good X, only Y B amount of Good Y can be produced. If X A amount of Good X, it will be possible to produce only Y A amount of Good Y. With the given resources, many combinations of the two goods can be produced in the economy. The production Possibility Curve is given below for such a situation. Let us consider an economy where two goods, good X and good Y are produced is produced. Therefore, when resources are transferred from one product to another, their productivity or efficiency in production decreases. Resources are not equally efficient in the production of both goods.These resources are fully and efficiently utilized.Using the given resources only 2 goods can be produced.Although, these resources can be transferred from one use to another. The amount of resources in an economy is fixed.The concept of the Production Possibility Curve is based on the following assumptions – In any case, the PPF will shift to the left side in the event of innovation corruption or a decrease in manufacturing assets.Īssumptions for Production Possibility Curve (PPC) On the Y-axis, rotate: An imaginative improvement or addition in resources for the making of an item on the Y-axis will turn the PPF to the right. In any case, the PPF will move to the side if innovative corruption occurs or assets used for creation decrease. The X-axis rotation: PPF will pivot to one side whenever an innovative improvement or asset increase is needed to make the product on the X-axis. The item on the X-axis or the Y-axis can undergo rotation. It occurs when a change in a single good’s useful limit (assets or innovation) occurs. Production possibility Curve class 11 traces the rotation of PPF as follows PPC’s Leftward Shift: When there is a decline in assets for both products and an innovative debasement, PPF will shift to the left.If “Development of Resources” or “Headway or Upgradation of Technology” applies to both products, PPF will shift to the right side. PPC’s Rightward Shift: when I get there.When both products undergo innovation or a change in assets, the PPC can shift either to the right or the left. PPC rotation: When there is a change in the useful limit (assets or innovation) in just one descent, PPF will rotate.Ĭlass 11 microeconomics chapter 1 notes discuss the change in PPC as follows.Change in PPC: When the useful limit (assets or innovation) for both goods changes, PPC will move.The Production Possibility Curve is also known as the Production Possibility Frontier, Production Possibility Boundary, Transformation Curve, Transformation Frontier or Transformation Boundary. The PPC is the locus of various possible combinations of two goods that can be produced with given resources and technology. Since the choice is to be made between infinite possibilities, economists assume that there are only two goods being produced. Production Possibility Curve (PPC) is the graphical representation of the possible combinations of two goods that can be produced with given resources and level of technology. What is Production Possibility Curve (PPC)? This is where the concept of the Production Possibility Curve (PPC) comes into the picture. Thus, society has to decide what to produce out of an almost infinite range of possibilities. In an economy, even if all the resources are used in the best possible manner, the capabilities of the economy are restricted due to the scarcity of resources. Characteristics of production possibility Curveĭue to scarcity of resources, society cannot satisfy all its wants.Assumptions of Production possibility Curve.
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