Advertisements
Advertisements
Question
Assuming that no resource is equally efficient in production of all goods, name the curve which shows production potential of the economy. Explain, giving reasons, its properties.
Advertisements
Solution
Assuming that no resource is equally efficient in production of all goods, the production possibility curve is the curve which shows set of combination of production possibilities of two goods with the given resources and technology.
Properties of PPC:-
1. PPC slopes downwards from left to right. It is because in a situation of fuller use of the given resources, production of both goods cannot be increased simultaneously. More of Good 1 can be produced only with less production of Good 2.
2. PPC is concave to the point of origin because to produce each additional unit of Good 1, more units of Good 2 will have to be sacrificed. Opportunity cost of producing every additional unit of Good 1 tends to increase in terms of the loss of production of Good 2. Production will act upon the law of increasing marginal opportunity cost.
3. Marginal rate of transformation increases as PPC slopes downwards from left to right.
4. All points which lie on the PPC are the set of combination of two goods with the full utilisation of resources and efficient utilisation of technology.
APPEARS IN
RELATED QUESTIONS
Give the meaning and characteristics of production possibility frontier.
Giving reason comment on the shape of production possibilities curve based on the following schedule:
| Good X (units) | Good Y (units) |
| 0 | 8 |
| 1 | 6 |
| 2 | 4 |
| 3 | 2 |
| 4 | 0 |
A large number of technical training institutions have been started by the government. State its economic value in the context of production possibilities frontier.
Giving reason, comment on the shape of Production Possibilities Curve based on the following table :
| Good X (units) | Good Y (units) |
| 0 | 4 |
| 1 | 3 |
| 2 | 2 |
| 3 | 1 |
| 4 | 0 |
Answer the following question.
Explain the meaning of opportunity cost with the help of a production possibility schedule.
Define Production Possibilities Curve. Explain why it is downward sloping from left to right.
Define flow variable.
Define flow variable.
Choose the correct alternative from given options:
In the given figure, the movement on the production possibility curve from point A to point B shows _____________.
Choose the correct alternative from given options:
Shift from Point A on Production Possibility Curve X1Y1 to point B on X2Y2 in the given figure indicates:
Answer the following question.
Why is a Production Possibility Curve concave to the origin? Explain.
______ are economic units that carry out the production.
Production possibility curve slopes downwards from ______ to ______.
Which of the following is the result of increase in price of factors of production?
Which of the following statement is true:
The total output generated by the first four units of variable input is 200 units, 350 units, 450 units and 500 units. The marginal product of the third unit of input is:
