Introduction of Microeconomics Class 11th Part 4 Production Possibility Curve (PPC) Chapter 1 Notes

Class 11 Chapter 1^st 

Introduction of Microeconomics

Topic – Production Possibility Curve (PPC)

Central problems of an economy are explained with the help of PPC. Let us appreciate the concept of PPC before this is used in explaining the central problems.

PPC is a curve showing alternative production possibilities of two Goods with the given resources and technique of production.

 It is also called production possibility boundary or frontier because it shows the limit of what it is possible to produce with present resources.

This curve is also called Transformation Line or Transformation Cure because it indicates that if more of good-X is to be produced then factors will have to be withdrawn from the production of good-Y and transferred to the production of good-X.In other words, good-Y is transformed into good-X.

Production possibility curve shows different combinations of a pair of goods which can be produced the given sources on the assumptions that

•        Resources are fully and efficient utilized, and
•      Technique of production is constant.

PPC is concave to the origin:-  It suggests that for every additional unit of good X more and more of good Y is to be sacrificed.


Shifting / Rotation of PPC 

Two Basic Properties of PPC :-

Production possibility curve has two basic properties:

(i)                 Production Possibility Curve Slopes Downward: Production possibility curve slopes downward from left to right. It is because in a situation of fuller utilization of the given resources, production of both the goods cannot be increased. More of good-X can be produced only with less of good-Y.

(ii)               Production Possibility Curve is Concave to the point of Origin: It is because to produce each additional unit of good X, more and more units of good-Y will have to be sacrificed than before. Opportunity cost of producing every additional unit of good-X tends to increase in terms of the loss of production of good-Y. In other words, production will obey the law of increasing opportunity costs.