Question

Discuss meaning of production possibility curve through a schedule and diagram.

Answer 1

Production Possibility Curve (PPC) is a curve which shows different possible combinations of two goods that can be produced with the given resources and technology, assuming that resources are fully and efficiently utilised.

Production Possibilities	A	B	C	D	E
Guns (Units)	0	1	2	3	4
Butter (Units)	10	9	7	4	0

Plot guns on the horizontal axis and butter on the vertical axis, then join the points representing these combinations. The resulting frontier slopes downward: producing more butter requires sacrificing guns. Under the usual assumption of increasing opportunity cost, it is concave to the origin.