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State the meaning and properties of production possibilities frontier. - Economics

State the meaning and properties of production possibilities frontier.

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Solution

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

Properties of PPC

1) Concave to the origin: PPC curve is concave to the origin. This is because of the increasing opportunity cost i.e. in accordance with the law of increasing opportunity cost.

2) Downward sloping curve: PPC curve is downward sloping from left to right. This is because the production of every additional unit of one good, more and more units of other good has to be sacrificed.

Concept: Indifference Curve
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