Menu Close

What are the assumptions of PPC curve?

What are the assumptions of PPC curve?

The production possibility curve is based on the following Assumptions: (1) Only two goods X (consumer goods) and Y (capital goods) are produced in different proportions in the economy. (2) The same resources can be used to produce either or both of the two goods and can be shifted freely between them.

Which is an assumption of the production possibilities model?

The economy is employing all of its available resources. The state of technology (the methods used to produce output) is constant. The economy is only producing two goods; for example: pizza & robots. Consumer goods (the pizza): products that satisfy our wants directly.

What are the assumptions of PPF Class 11?

The basic assumptions of production possibility curve are:

  • The resources are given and remain constant.
  • The technology used in the production process remains constant.
  • The resources and technology are fully and efficiently utilized.
  • The technique of production remains constant.

What are the characteristics of production possibility curve?

The two main characteristics of PPC are:

  • Slopes downwards to the right: PPC slopes downwards from left to right.
  • Concave to the point of origin: It is because to produce each additional unit of commodity A, more and more units of commodity B will have to be sacrificed.

What is PPC and its features?

Production Possibility Frontier or Production Possibility Curve is the curve which shows the combinations of two goods and services that can be produced with fuller utilisation of a given amount of resources in the most efficient way and with a given production technology.

What are the four factors of production?

Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship. The first factor of production is land, but this includes any natural resource used to produce goods and services. This includes not just land, but anything that comes from the land.

Why is PPC downward sloping?

The downward sloping nature of the PPC is due to the law of increasing opportunity cost. According to this law, with the fuller utilisation of the given resources, in order to produce an additional unit of one good, some of the resources are to be withdrawn from the production of another good.

Why is production possibility curve concave Class 11?

Production Possibility Curve is concave to the origin because to produce each additional unit of good X more and more unit of good Y is to be sacrificed. Opportunity cost of producing every additional unit of good A tends to increase in terms of the loss of production of good Y.

What are the three types of production possibility curve?

There are 3 types of production possibility curve which are straight-line sloping down, concave and convex curve.

What is PPC explain with examples?

In business, a production possibility curve (PPC) is made to evaluate the performance of a manufacturing system when two commodities are manufactured together. The management utilises this graph to plan the perfect proportion of goods to produce in order to reduce the wastage and costs while maximising profits.

What is an example of a production possibility curve?

The guns and butter curve is the classic economic example of the production possibility curve, which demonstrates the idea of opportunity cost.

What does production possibilities curve illustrates?

Term production possibilities curve Definition: A curve that illustrates the production possibilities for the economy. A production possibilities curve (or PPC), like the one presented here, represents the boundary or frontier of the economy’s production capabilities.

What is a product possibility curve?

A production possibilities curve PPC is an economic model that shows the production efficiency and allocation possibilities of the economy for a given level of resources. More specifically, it describes a society’s trade-off between two goods or services or two types of goods and services.

What does production possibilities curve show?

The production possibilities curve (PPC) is a graph that shows all of the different combinations of output that can be produced given current resources and technology. Sometimes called the production possibilities frontier (PPF), the PPC illustrates scarcity and tradeoffs.