What is a graphical representation of the combination of goods and services that can be produced in a situation production possibility curve?
(also called a production possibilities frontier) a graphical model that represents all of the different combinations of two goods that can be produced; the PPC captures scarcity of resources and opportunity costs.
What is production possibility curve explain with diagram?
The production possibility curve represents graphically alternative production possibilities open to an economy. The productive resources of the community can be used for the production of various alternative goods. But since they are scarce, a choice has to be made between the alternative goods that can be produced.
How does a production possibility Chart assist in outlining?
How does a production possibility chart assist in outlining opportunity cost? It compares production numbers of one product to another. Wanting to expand into selling potted plants, they create a production possibility chart to asses whether the potted plants are a good idea.
What is production possibility curve with example?
The curve measures the trade-off between producing one good versus another. For example, say an economy can produce 20,000 oranges and 120,000 apples. On the chart, that’s point B. If it wants to produce more oranges, it must produce fewer apples.
Why is production possibility curve concave Class 11?
The shape of a PPF is commonly drawn as concave to the origin to represent increasing opportunity cost with increased output of a good. Thus, MRT increases in absolute size as one moves from the top left of the PPF to the bottom right of the PPF.
What is production possibility curve Class 11?
In business, the Production Possibility Curve (PPC) is applied to evaluate the performance of a manufacturing system when two commodities are manufactured together. When a firm diverts its resources to produce commodity B, the production of commodity A will reduce.
What is the slope of PPC?
The slope of production possibility curve is the marginal opportunity cost which refers to the additional sacrifice that an economy makes when it shifts resources and technology from production of one commodity to the other.
What are the properties of PPC?
The two main characteristics of PPC are:
- Slopes downwards to the right: PPC slopes downwards from left to right.
- Concave to the point of origin: It is because to produce each additional unit of commodity A, more and more units of commodity B will have to be sacrificed.
What is the shape of PPC?
Since resources are use specific, therefore every time when one more unit of a product X is produced more units of product Y are sacrificed that results in increasing marginal opportunity cost which leads to the concave shape of the PPC.
Why is PPC negatively sloped?
The negative slope of the production possibilities curve reflects the scarcity of the plant’s capital and labor. Producing more snowboards requires shifting resources out of ski production and thus producing fewer skis.
Why is a PPC concave?
Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity are sacrificed that results in increasing marginal opportunity cost which leads to the concave shape of the production possibility curve.
Why PPC is not a straight line?
1 Answer. Its always drawn as a curve and not a straight line because there a cost involved in making a choice i.e when the quantity of one good produced is higher and the quantity of the other is low. This is known as opportunity cost.
Can a PPC be a straight line?
In Economics, PPC stands for Production Possibility Curve. Yes, it can be a straight line. Opportunity cost (also called as ‘marginal rate of transformation’) is in direct proportion with the shape of the PPC.
What does a convex PPC mean?
production possibility curve
Can PPC curve be a straight line?
A PPC curve can be a straight line only if the marginal rate of transformation (MRT) is constant throughout the curve. A MRT can remain constant only if both the commodities are equally constant and the marginal utility derived from their production is also constant.
Can PPC be convex?
PPC is concave shaped because of increasing marginal rate of transformation. It implies that more and more units of commodity sacrificed to gain an additional unit of another commodity. PPC is convex shaped because of decreasing marginal rate of transformation.
Why PPF is a straight line?
A straight line PPF: A straight line PPF where the opportunity cost is constant. The slope of the PPF shows the rate at which the production of one good can be transferred to another. Within an economy, if the capacity to produce both goods increases, the result is economic growth.
Is a shift in PPC always parallel?
It is not necessary that the PPC always shifts parallely, rather a rotational shift along the axis can also take place in case there is a change in the production technology of only one of the goods.
Why is PPC called opportunity cost?
Production Possibility Curve is called the opportunity cost curve as it is the curve which shows the combinations of two goods and services that can be produced with fuller utilisation of a given amount of resources in the most efficient way and with a given production technology. PPC is concave to origin.
How do you increase potential output?
Growth in the size of the working population enables an economy to increase its potential output. This can be achieved through natural growth, when the birth rate exceeds the death rate, or through net immigration, when immigration is greater than emigration.
When can an economy increase the production of one good without reducing the output of another?
An economy can increase the production of one good without reducing the output of another good if: there are no unemployed resources and the economy is operating within the production possibilities frontier. there are no unemployed resources and the economy is operating outside the production possibilities frontier.
What are the three basic economic questions?
Economic systems answer three basic questions: what will be produced, how will it be produced, and how will the output society produces be distributed? There are two extremes of how these questions get answered.
Under what conditions is it possible to increase production of one good without decreasing production of another good?
5. (Production Possibilities) Under what conditions is it possible to increase production of one good without decreasing production of another good? An economy can produce more of one good without sacrificing production of another good if it is operating inside its PPF.
What is production efficiency?
Production efficiency is an economic term describing a level in which an economy or entity can no longer produce additional amounts of a good without lowering the production level of another product. Productive efficiency similarly means that an entity is operating at maximum capacity.
What is an example of allocative efficiency?
Allocative efficiency means that the particular mix of goods a society produces represents the combination that society most desires. For example, often a society with a younger population has a preference for production of education, over production of health care.
What is production efficiency formula?
Production Efficiency = (Actual Output Rate / Standard Output Rate) x 100. For example, a manufacturing company has received a new order of 200 units.
What is difference between productivity and efficiency?
Put simply, productivity is the quantity of work produced by a team, business or individual. Efficiency, on the other hand, refers to the resources used to produce that work. So, the more effort, time or raw materials required to do the work, the less efficient the process.