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Properties of Production Possibility Curve (PPC).. Video Lecture - Class 12

FAQs on Properties of Production Possibility Curve (PPC).. Video Lecture - Class 12

1. What is a production possibility curve (PPC)?

Ans. A production possibility curve (PPC) is a graphical representation of the different combinations of two goods or services that an economy can produce with its given resources and technology. It shows the maximum output that can be obtained by allocating resources efficiently between the two goods or services.

2. What factors determine the shape of a production possibility curve?

Ans. The shape of a production possibility curve is determined by the concept of opportunity cost. Opportunity cost refers to the value of the next best alternative that is forgone when choosing one option over another. If the opportunity cost remains constant, the PPC will have a straight-line shape. However, if the opportunity cost changes as more of one good is produced, the PPC will be concave (curved).

3. How does a production possibility curve illustrate scarcity?

Ans. A production possibility curve illustrates scarcity by showing the limited resources and the trade-offs that an economy faces in producing different goods or services. The curve demonstrates that it is not possible to produce an unlimited quantity of both goods simultaneously. It highlights the need to make choices and allocate resources efficiently to maximize production.

4. What does a point on the production possibility curve represent?

Ans. A point on the production possibility curve represents an efficient allocation of resources, where all available resources are fully utilized. It indicates the maximum combination of goods or services that an economy can produce with its given resources and technology. Any point inside the curve represents an inefficient use of resources, while any point outside the curve is unattainable given the current resources and technology.

5. How can a production possibility curve shift?

Ans. A production possibility curve can shift due to changes in factors such as technology, resources, and efficiency. If there is an improvement in technology or an increase in the quantity or quality of resources, the curve will shift outwards, indicating an increase in the economy's potential output. Conversely, if there is a decrease in technology or a reduction in resources, the curve will shift inwards, showing a decrease in the economy's potential output.

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