THE PRODUCTION POSSIBILITY CURVE – PPC

CONTENT

1. Definition of Production Possibility Curve
2. Conditions that May Cause the Outward Shift of Production Possibility Curve

Definition of Production Possibility Curve

The production possibility curve (PPC) is a graphical representation of the possible combinations of two commodities that can be produced in an economy given her level of technology and the efficient utilization of all available productive resources. Production possibility curve may also be referred to production possibility frontier, production possibility boundary, production indifference curve or production transformation curve. The production possibility curve analysis is based on a number of assumptions including:

• That only two classes of commodities are produced in an economy.
• That all productive resources are being fully employed or utilized.
• That the resources meant for production are scarce or limited.

The production possibility curve is a tool used to solve economic problems of allocation of resources and choice in terms of what, how and for whom to produce.

There are some possible options in the use of available resources for production as illustrated in the table and graph below:

Production Possibility Table: For Food Crops and Textiles

Production Possibility Curve

The possible combinations/options are:

A – All resources are concentrated on the production of textiles and no food.