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What is a Production Possibilities Curve

In business, a production possibility curve (PPC) is made to evaluate the performance of a

manufacturing system when two commodities are manufactured together. The management
utilises this graph to plan the perfect proportion of goods to produce in order to reduce the
wastage and costs while maximising profits.

The diagram or graph explains the units of goods that a company can produce if all the
resources are utilised productively. Therefore, a single commodity’s maximum manufacturing
probability is arranged on the X-axis and that of the other commodity on the Y-axis. Here, the
curve is represented to show the number of products that can be created with limited
resources, while pausing the use of technology in between.

In the graph, the line sloping down also depicts the trade-off between producing commodity
A and commodity B. When a firm diverts its resources to produce commodity B, the
production of commodity A reduces.

A point above the curve indicates the unattainable with the available resources. A point below
the curve means that the production is not utilising 100 percent of the business’ resources.

Related link: What is Demand?

Production Possibilities Curve Example

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The production of 20,000 watermelons and 1,20,000 pineapples is shown on point B in the
graph. If the production of watermelons needs to be more, then the production of pineapples
should be less. On the graph, point C indicates that if the production of watermelons has to be
45,000, then the company can deliver only 85,000 pineapples. With this trade-off, the curve
shows the idea of opportunity cost.

The production possibility curve also shows the choice of society between two different
products.

You might want to know: What is Consumer Equilibrium?

Production Possibilities Curve Diagram

Shape of PPC ● It is downward sloping and concave to the point of origin.

Reasons ● It is downward sloping because of the few units we sacrifice for the others, as
for such there exists an inverse relationship between the change in quantity of one
shape of commodity and the change in quantity of the other commodities.
PPC
● PPC is concave-shaped because more and more units of one commodity
are sacrificed to gain an additional unit of another commodity.
 Underutili ● However, if there is unemployment or inefficiency in resource utilisation,
sation of then we can produce at any point inside the PPC.
resource
s

(Any
point
under
the PPC)

Must Read: How to Study Economics Effectively

This concept explains the production possibilities curve. Stay tuned for questions papers,
sample papers, syllabus, and relevant notifications on our website.

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keerthi
May 6, 2020 at 9:15 pm

Thanks it was useful ὠὠὤὣ

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Sagar
August 26, 2020 at 10:35 am

Thank you ὠ

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Lalita sabharwal
October 17, 2020 at 2:01 pm

Thanks I totally understand every line easily thanks again ὤὤ

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Mohit S
February 21, 2021 at 1:45 pm

I totally understood all the words very easily, Thanks for helping me!

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