Thankyou Ridhi, carrying the presentation forward, I’ll now be covering the basics of

Production possibility curve.

The production possibilities curve (PPC) is a graph that shows all of the different
combinations of output that can be produced for a given current resources and technology.
Sometimes called the production possibilities frontier (PPF), the PPC illustrates scarcity and
tradeoffs. (About which we’ll be seeing later in this presentation)

(Change Slide)

To understand PPC in a very easy way, let’s get back to the basics of life. This is going to be a
story of caveman named Tarzan. Tarzan, like other caveman survives on 2 activities – hunting
and gathering. For simplicity let’s assume he hunts only rabbits and gathers only berries.

Now, before we proceed further to make a Production possibility curve for Tarzan, here are
few assumptions that we must make:

(Change Slide)

 The amount of resources is fixed. (Which is time here. Let’s assume he can only engage for 8
hrs in hunting/gathering in a day)
 With the help of given resources only two goods can be produced. (Like I mentioned earlier
we’ll assume only rabbits and berries are possible food options)
 The resources are fully and efficiently utilized. (He does his max work and doesn’t slack off
during the working 8hrs of time)
 Resources are not equally efficient in production of all goods.
 The level of technology is assumed to be constant. (Tech here is basically the tools and
methods that he uses to hunt and gather)
(Change Slide)
Being a visionary of his time, Tarzan collected data of his hunting and gathering over a period of time
and averaged it to the given table. This table shows how many rabbits and berries he can possibly get
in one day, performing at his best.
(Explain in the chart)
(Change Slide)
Now coming to the features of the production possibility curve: there are three major things that the
chat helps us with. First, it shows how much of each good will be produced when there is a shift in
resources. Second, it shows the production sacrifice that has to be made to produce more of any one
good. Third, it demonstrates the concept of opportunity cost which will be covered in the subsequent
slides.
In this chat given on the slide we can see there is a production possibility curve made of points A and
D and there are two other points E&F. E is a scenario that can be achieved when we don't use the
resources efficiently and F is a point which represents a scenario which is not possible to attain. So, in
general sense the points that lie inside of the curve are scenarios which are easily attainable since the
resources are not used efficiently, and all the points out side of the curve are unattainable since the
most efficient use of the resource was taken as the input to draw the curve.
(Change Slide)
There are two other basic terms that we have to understand, - the opportunity cost and the marginal
cost. To do let’s takes scenario C. In this scenario, Tarzan has two rabbits and 240 berries. Let's
assume now he craves a little more for rabbits, so he wants to shift to scenario D where he'll have
three rabbits and 180 berries. Now the trade-off he has to do here is 60 berries for one rabbit.
These 60 berries happens to be the opportunity as well as the marginal cost for one rabbit when we are
at scenario C.
(Change Slide)

To understand what marginal cost is, lets take another scenario. – EXPLAIN!!
Point to note would be that opportunity cost and marginal cost vary for each scenario in the
given example.
(Change Slide)

---------------------------------------------------------------------------------------------------------------------------
--
Now that we saw about the opportunity cost, it is very important to understand the different shapes of
a production possibility curve:
It reveals important information about the opportunity cost involved in producing two goods. When
the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve.
When the PPC is concave (bowed out), opportunity costs increase as you move along the curve. When
the PPC is convex (bowed in), opportunity costs are decreasing.
Explain in slide
And that will be the basics of PPC. Over to Partap for explaining the changes in PPC.