Question

What does production possibility curve show?

Hint:

The production possibility curve illustrates the trade-offs and opportunity costs faced by an economy in the production of two goods, helping to understand the limits of production efficiency.

Answer 1

The production possibility curve (PPC), also known as the production possibility frontier (PPF), is a graphical representation of the maximum possible output combinations of two goods or services that an economy can produce given its resources and technology. The curve illustrates the trade-offs between two different goods that a society can produce and shows the opportunity cost of choosing one good over another.
Step 1: Illustrating Scarcity and Choice.
The PPC demonstrates the concept of scarcity by showing that an economy can produce only a limited number of goods due to finite resources. It forces societies to make choices about how to allocate their resources. The curve highlights that to produce more of one good, resources must be diverted from producing another good, resulting in an opportunity cost.

Step 2: Efficiency and Inefficiency.
Points on the PPC curve represent efficient production, where all resources are fully utilized. Any point inside the curve indicates inefficiency, where resources are underutilized, and points outside the curve are unattainable with the current resources and technology. The curve also helps to demonstrate the concept of increasing opportunity cost, as more of one good is produced, the opportunity cost of producing additional units of that good increases.