PRODUCTION POSSIBILITY CURVE ( NCERT ) - COMMERCE SCHOOL

WHAT IS PRODUCTION POSSIBILITY CURVE ?

Production possibility curve help us in understanding how we use limited resources for satisfying our unlimited  needs .

In this curve we study how we produce combination of two goods with limited resources . This means that production of one good , is only increase when we reduced the production of other good  , due to limited  availability of resources . 

Therefor , the PPF measure the efficiency in which two good produced together , helping manager and leaders decide what kind of goods is most beneficial .

The PPF assume that technology is constant , resources are used efficiently , and that there is normally only a choice between two goods .

Suppose , we have two commodities capital and consumers . capital goods are depicted in X axis and consumers goods are in Y axis , if we want to produced more capital goods , we have decreased the production of consumer goods and if we want to produce more consumer goods we have to decrease production of capital goods this is because of limited resources .

Therefore , any mix of two commodities , given limited resources , only efficient when it lie on the PPF curve . Achieving the Pareto efficiency that an economy is operating at maximum potential .