2. “Production Possibility Cure(PPC) show all
possible combinations of two goods which an
economy can produce with full and efficient use
of its given resources and available technology”
PPC
3. Assumptions
1. Resource are given and used fully and efficiently
2. Technology is given and remains constant
3. Resources are not equally efficient in production of all
goods
4. Production possibility schedule
Wheat (in Lakh Tonnes)
10
8
6
4
2
1 2 3 4 X
Y
Guns
(in
thousands)
O
Production
Possibilities
(Combinations)
A
B
C
D
E
Wheat
(In Lakh
Tonnes)
0
1
2
3
4
Guns
(in thousands)
10
9
7
4
0
Diagram
A
B
C
D
E
5. Production possibility schedule
Wheat X
Y
Guns
O
Diagram
AE PP Curve
A
B
C
D
E
In the diagram quantity of wheat is represented on X- axis and guns on Y-axis . Different
possibilities of production is indicated by “A”, “B”, “C”, “D”and “E”. By combination
all these points, we get PPC or transformation curve “AE”
6. Indication of points on, below and
above PPC
Wheat
10
8
6
4
2
1 2 3 4 X
Y
Guns
O
A
B
C
D
E
K
S
T
Full employment or resources / efficient
technology
Unattainable combination
Unattainable
combination
7. Points
1. When economy is producing on PPC , every point on it (like A, B, C, D and E)
show-
a) Full utilization
b) Efficient utilization of resources
c) Efficient technology
2. When economy is operating at any point below or inside PPC such ad “K” and “S”
point , it reflects the situation of
a) Underutilisation of resources
b) Inefficient utilization of resources
c) Inefficient technology
3. Any point outside the PPC (point T ) shows unattainable combination of output of
two goods
8. Change In Resources
(i). Resources are increased
Wheat
A
B
X
Y
Guns
O
A1
B1
PPC shifts to the right.
We can produce more of both the goods
AB- original PPC, A1B1 – new PPC when
resources are Increased
9. Example
Of
growth of resources
1. Availability of new equipments.
2. Increase in skilled and unskilled labour through population growth.
3. Discovery of new natural resources Etc.
10. Change In Resources
(ii). Resources are reduced
Wheat
A
B
X
Y
Guns
O
A2
B2
PPC shifts to the left
We can produce less of both the goods
AB- original PPC, A2B2 – new PPC when
resources are reduced
12. (i). Change in technology for the production of Commodity X
Wheat
A
B
X
Y
Guns
O B1
More production of “X” with same
resources
PPC will rotate towards “X-axis”
AB –PPC from given technology, AB1 –
new PPC improved technology for “X”
13. (ii). Change in technology for the production of commodity Y
Wheat
A
B
X
Y
Guns
O
A2
More production of “Y” with same
resources
PPC will rotate towards “Y-axis”
AB –PPC from given technology, A2B –
new PPC improved technology for “Y”
14. (iii). Change in technology for the production of both the goods
Wheat
A
B
X
Y
Guns
O
A1
B1
More production of both the commodities
with the same resources.
PPC will shift to the right
AB –PPC from given technology, A1B1 –
new PPC from improved technology for
both the commodities
