Production Possibility Curve Video Lecture | Study Economics for CA CPT - CA Foundation | Best Video for CA Foundation

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hello students I'm gonna karana from
topper learning is here to briefly take
you through the concept of production
possibility curve the flow of this video
is firstly we will be learning about the
meaning slope and shifting and rotation
of production possibility curve secondly
we will be practicing few hearts
questions starting with production
possibility curve so tell me first what
do they mean by production possibility
curve as you can see production
possibility curve is made of three words
production possibility and curve
production means process of making or
manufacturing something possibility
refers to the various alternatives or
combinations and curve is basically the
outline so adding up the meanings of
these three words we get the definition
of production possibility curve
production possibility curve or PPC
refers to the curve showing various
combinations of two goods which can be
produced with the given resources and
level of technology in the economy
people see has certain assumptions which
are resources in the economy are given
and fixed the level of Technology is
constant resources are fully and
efficiently employed in the economy
resources or inputs cannot produce all
the products efficiently let's make a
note over here production possibility
curve is also known as production
possibility boundary production
possibility frontier transformation
curve and transformation line now you
must be thinking why PPC is known with
these names
PPC is known as production possibility
boundary and production possibility
frontier since people see
Sabbath's the production limit of an
economy people say is also called
transformation curve and transformation
line as people see shows how one good is
getting transformed into another good
that is considering the given diagram if
the economy wants to produce more off
codecs than good why needs to be
sacrificed thus here good wires getting
transformed into good X now let's
understand the slope of people see the
slope of people see is known as marginal
optionally cost or marginal rate of
transformation it is defined as the rate
at which output of good-y is being
sacrificed for every additional unit of
good-x
it is calculated as change and good-y
upon change in good X for the given data
as you can see MRT has been calculated
we can observe here that we are getting
negative values for MRT and there s rise
in numbers from 2 to 3 3 to 4 and 4 to 5
what could be the reasons for these the
negative sign is due to downward slope
of PPC and there is rise in numbers
because slope of PPC increases as we
move down hence we can conclude that
shape of PPC is based on marginal
opportunity cost in the sense PPC can be
concave to origin straight line or
convex to origin PPC is concave to
origin when marginal opportunity cost
increases people see a straight line
when Marshall opportunity cost is
constant PPC is convex to origin when
marginal opportunity cost decreases you
can see the shape of people see under
different cases on the slide having
understood the meaning of PPC let's
study the shifting and rotation of PPC
we know that people see is drawn with a
given amount of resources and level of
technology so people
see can't shift or rotate only when
there is a change in the availability of
resources or change in technology or
both the goods taking the case off shift
first PPC will shift to the right under
two conditions when resources are
increased or the technology is
appreciated
similarly PPC will shift to left under
two conditions when resources are
decreased or technology is depreciated
coming to rotation part PPC will rotate
when there is a change in the
availability of resources or change in
the technology for one of the two goods
it can be of two types
rotation for good on x axis rotation for
good on y axis rotations are good on x
axis can be the right word rotation or
leftward rotation rightward rotation
will be there when the sources for
production of good-x are increased or
technology appreciates for the
production of good X in the same manner
left o rotation takes place when
resources for production of good X are
decreased or technology depreciates for
the production of good X similarly
rotation for good on y axis can be the
right word rotation or left for rotation
rightward rotation will be there when
resources for production of good-y are
increased or technology appreciates for
the production of word Y in the same way
left per rotation takes place when
resources for production of good Y are
decreased or technology depreciates for
the production of good Y so I hope that
this you all are clear with the meaning
and shifting annotation of PPC let's
discuss some hot favorite questions of
CBSE first question is what is likely to
be the impact of make it into your
appeal to the foreign investors by the
prime minister of india on the
production possibilities frontier of
india explain
now to answer this question first we
need to see the impact of making India
policy on resources and technology of
India we can clearly see that it is
affecting the resources of India you
must be wondering how making India
appeal to foreign investors by Prime
Minister of India will basically lead to
inflow of foreign capital in India this
inflow of capital will increase the
resources that is money in India
therefore PPC will shift to the right
second question is a value-based
question which says large number of
technical training institutions have
been started by the government state its
economic value in the context of
production possibilities frontier this
question is quite simple basically large
number of technical training
institutions will increase the
efficiency of people and thereby will
increase the production potential of the
country hence the PPC will shift to the
right indicating economic value in terms
of increase in output let's see the last
question comment on the shape of PPC
based on the given schedule now you can
see the schedule on the slide in order
to know the shape of PPC let's first
calculate marginal opportunity cost we
can clearly see that marginal
opportunity cost is increasing from 3 to
6 6 to 9 and 9 to 12 hence for the given
data the shape of PPC is concave to
origin we are done with the concept of
PPC hope you enjoy the session
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