How To Draw Production Possibility Curve
Production Possibility Curve (Explained With Diagram)
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The production possibility curve represents graphically alternative production possibilities open to an economy.
The productive resources of the community can be used for the product of various culling goods.
But since they are scarce, a selection has to be made between the alternative goods that can be produced. In other words, the economy has to choose which goods to produce and in what quantities. If information technology is decided to produce more than of sure goods, the production of certain other appurtenances has to exist curtailed.
Allow us suppose that the economic system can produce ii bolt, cotton fiber and wheat. Nosotros suppose that the productive resources are existence fully utilized and there is no alter in engineering science. The following table gives the various product possibilities.
Information technology all bachelor resource are employed for the product of wheat, 15,000 quintals of it can be produced. If, on the other mitt, all bachelor resources are utilized for the production of cotton wool, 5000 quintals are produced. These are the two extremes represented by A and F and in between them are the situations represented by B, C, D and E. At B, the economy can produce 14,000 quintals of wheat and 1000 quintals of cotton.
At C the production possibilities are 12,000 quintals of wheat and 200u quintals of cotton, as nosotros motion from A to F, we surrender some units of wheat for some units of cotton For example, moving from A to B, nosotros sacrifice k quintals of wheat to produce thou quintals of cotton fiber, and then on. As nosotros motility from A to F, we sacrifice increasing amounts of cotton fiber.
This means that, in a full-employment economy, more and more of one adept can be obtained simply by reducing the product of some other good. This is due to the bones fact that the economic system'south resources are express.
The post-obit diagram (21.2) illustrates the production possibilities set out in the above tabular array.
In this diagram AF is the product possibility curve, too chosen or the production possibility frontier, which shows the various combinations of the two goods which the economic system can produce with a given amount of resource. The production possibility curve is also called transformation curve, considering when nosotros move from one position to another, we are actually transforming 1 skilful into another by shifting resources from i use to some other.
It is to be remembered that all the points representing the various reduction possibilities must prevarication on the production possibility curve AF and not inside or exterior of it. For example, the combined output of the two goods tin can neither be at U nor H. (See Fig. 21.3) This is so because at U the economic system will be under-employing its resource and H is across the resource available.
Source: https://www.economicsdiscussion.net/production/production-possibility-curve-explained-with-diagram/1563
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