about Production Possibility Curve

1. SUBJECT –MANAGERIAL ECONOMICS
ASSIGNEMENT-1
SUBMITTED TO: SUBMITTED BY:
SONUCHOWDHURYMA’AM JAGRITI LADHA
(2018SUMBGN014)

2. TABLE
ConsumerGoods(Millionsof units) Capital Goods(Millionsof units)
0 45
10 40
20 32
30 20
40 0
CONSUMERS GOODS – Consumer goods are products bought for
final consumption by consumers. Alternatively called Final Goods,
Consumers Goods are the end result of production and manufacturing
and are what consumers will see on the store shelf. Clothing, food and
jewelry are all examples of Consumers Goods. It has two types-
 Durable Goods
 Non durable Goods
0
5
10
15
20
25
30
35
40
45
50
0 10 20 30 40 50
CAPITALGOODS
CONSUMER GOODS
Production Possibility Curve
capital goods

3. CAPITAL GOODS – Capital Goods are tangible assets that a business
uses to produce goods or services that are used as inputs for other
businesses to produce Consumer Goods. Said another way, Capital
Goods are tangible assets, such as buildings, machinery, equipments,
vehicles and tools that one organization uses to produce goods or
services as an input to produce consumer goods and goods for other
business.
PRODUCTION POSSIBILITY CURVE – The Production Possibility
Curve depicting all maximum output possibilities for two goods, given
in a set of inputs consisting of resources and other factors. The PPC
assumes that all inputs are used efficiently.
QUESTION-1
OPPORTUNITY COST – Opportunity cost is the value of next best
alternative use.
As given in question, If the company is increasing the production of
consumer goods from 20 million units to 30 million units then they to
sacrifice the capital goods from 12 million units. This is the opportunity

4. cost of consumer goods.
If the company is increasing the production of capital goods from 40
million units to 45 million units then they have to sacrifice all their
consumer goods, as we can see in graph when capital goods units are
45 million units there is no production of consumer goods. This is the
opportunity cost of capital goods.
0
10
20
30
40
50
0 10 20 30 40 50
CAPITALGOODS
CONSUMER GOODS
Production PossibilityCurve
capital goods
0
5
10
15
20
25
30
35
40
45
50
0 10 20 30 40 50
CAPITALGOODS
CONSUMER GOODS
Production Possibility Curve
capital goods

5. QUESTION-2
In my opinion, The ideal point on PPC for this Economy to operate is at
point C, where both consumer goods and capital goods are producing
at equal level because both are equally necessary for the economy.
REASONS-
 For Consumers Goods
 Consumer Goods are having Long Life Span as consumer
used it in daily needs or wants.
 Consumer Goods can be used over time.
 For Consumer Goods government has made an act that is
consumer production safety act.
 Consumer Goods provide satisfaction directly to the
consumer i.e. they are the part of society.
 For Capital goods
 In Capital Goods there is a high barriers to entry for
new company, so there is less competition in market.
 Capital Goods are used to help in production of
consumer goods and capital goods itself.
 Capital Goods are not directly related to consumer
but related to manufactures and traders.

6. QUESTION-3
Life be like in this economy 10 years from now if today it produced only
CONSUMERS GOODS-
 Economic life of manufacture and traders will over as there is no
production of capital goods in economy.
 If there is no improvement in technology then the consumer are
not interested in purchasing anything.
 Population will always increase so the employment will decrease.
Life be like in this economy 10 years from now if today it produced only
CAPITAL GOODS-
 From capital goods production there is technology advancement
is possible.
 As by increase in production of capital goods, there is more
machinery work so employment will increase.

7.  Consumer needs will not get directly satisfied.
NOTE- According to me, both types of goods should produce
simultaneously because these two are equally important for growth of
economy, as capital goods will help the GDP and consumer goods help
all the persons in their overall growth.
QUESTION-4
If new technology werecreated for producing both Capital Goods and Consumer
Goods the PPC will shift towards rightas we can see in the graph below
0
5
10
15
20
25
30
35
40
45
50
0 10 20 30 40 50
CAPITALGOODS
CONSUMER GOODS
Production Possibility Curve
capital goods