Techno India Group Public School Coochbehar

Session 2020-21
Subject - Economics
Topic - Effect on PPC
Graph

Submitted by: Biki Das

Class — XI
Stream — Commerce
Roll no. — 5
PRODUCTION
POSSIBILITY
CURVE
Gratitude
I feel highly privileged & honored in making the project report on PR
ODUCTION POSSIBILITY CURVE
(PPC).
I express my sincere gratitude to our teachers, parents, and all
our friends for their kind cooperation for preparing this project. My
special thanks to our guide, our mentor Mrs. Chakita Mitra Sarkar for
her continuous support & encouragement that led to the development of
this material. I would also like to thank our Principal Mrs. Soma Tar
an madam for her caring & encouraging attitude towards us.
I am highly grateful to all government officers and Principals o
f different schools who have helped us to prepare this project.
I look forward to receive valuable suggestions from teachers, st
udents and viewers also.
Thank You
CONTENTS
 Introduction.
 Assumptions.
 Objectives of PPC.
 Slope of PPC.
 Properties of PPC.
 Shapes of PPC.
 Shifts of PPC.
 Rotation of PPC.
 Solutions of Central Problems by
PPC.
 Combinations on PPC.
 Conclusion.
 Bibliography.
Introduction
A Production Possibility Curve (PPC) or Production Possibility Fron
tier (PPF) shows the graphical presentation of various combination
of two goods that can be produced with available technologies and g
iven resources.

In the context of the diagram: a point on the frontier indicates ef

ficient use of the available inputs (such as A, B and C in the grap
h), a point beneath the curve (such as X) indicates inefficiency, a
nd a point beyond the curve (such as Y) shows impossibility
Assumptions
The resources available are fixed.
The technology remains unchanged.
The resources are fully employed.
The resources are efficiently employed.
The resources are not equally efficient in production of
all products. Thus, if resources are transferred from pr
oduction of one good to another, the cost increases. In
other words, marginal opportunity cost increases.
Objectives
• Effectiveness: Goods to fulfill customer's needs.
• Maximizing output: Maximum output with minimum input.
• Quality control: Product/service quality meets planned q
uality specifications.
• Minimize the time: Conversion of raw material to finishe
d goods in minimum time.
• Maximize profit: Minimize cost.
Slope of
PPC
Marginal opportunity cost (MOC) / Marginal rate of transf
ormation (MRT) is the slope of PPC (Production Possibilit
y Curve). In other words, shape of PPC depends on MOC / M
RT.
MOC is the loss of output of output of one commodity (say
Y) when a unit more of other commodity (say X) is produce
d by shifting resources from one good to the other (from
Y to X). It is also rate of sacrifice.
MRT is the rate at which the units of output of one good
are sacrificed to produce one more unit of the other good
.
In order to produce an additional unit of X, the producer has t
o sacrifice some units of Y. For example, if he wants to produc
e 2 units of bread, he will have to sacrifice 2 units of drill
presses, or MOC is 2 units.
Properties
I. Concave to Origin.
PPC curve is concave to the origin. This is because of the increasing
opportunity cost.
II. Increasing Marginal Rate of Transformation.
The slope of PPC shows, for the production of every additional unit of one
good, more and more units of other good has to be sacrificed.
III. Downward Sloping
PPC curve is downward sloping as more production of one good is
associated with decline in production of the other good.
IV. Optimum utilization of resources.
The points that lie on the PPC are associated with full employm
ent of resources and efficient utilization of the available tec
hnology.
Shapes
Production Possibility Curve (PPC) can have three shapes:
1. Concave:
It is due to increasing MOC. It means that in order to pr
oduce more units of X, more units of Y are sacrificed or
rate of sacrifice increases. It is due to application of
law of diminishing returns.
2. Convex:
Convex PPC is due to decreasing MOC. It means that in ord
er to produce more units of commodity X, less units of co
mmodity Y are sacrificed. This is because of application
of law of increasing returns.
3. Straight:
It is due to constant MOC. It means that in order to prod
uce more units of commodity X (Clothes), same units of go
od Y (Food) are sacrificed remains constant. This is beca
use of application of law of constant returns.
Shift of
PPC
1. Rightward shift of PPC:
The PPC will shift to the right when there is
• Economic growth.
• Increase in resources.
• Technological change.
2. Leftward shift of PPC:
The PPC will shift to its left
due to
• Economic disaster.
• Decrease in resources.
• Technological change.
Rotation of
PPC
1. Change in commodity on Y-a
xix:
• If there is increase in r
esources or technological imp
rovement for good (on X axis)
, then PPC will rotate from A
B to AC (rightward).
• If there is decrease in res
ources or degradation of techn
ology for good (on X axis), th
e PPC will rotate from AB to A
D (leftward).
2. Change in commodity on Y-a
xis :
• If there is increase in reso
urces or advancement in tech
nology for gun (on Y-axis),
PPC will rotate to its right
from AB to CB.
• If there is decrease in reso
urces or degradation in tech
nology for guns (on Y-axis),
PPC will rotate to its left
from AE to DE.
Solutions of Central Problems b
y PPC
1. What to produce:
Due to scarcity of resources, an economy has to decide al
location of its resources towards the chosen goods as all
goods cannot be produced.
Let us assume that economy has decided to produce wheat a
nd cotton and also different options of choosing the quan
tities of these two goods.
 Possibilities Cotton (Units) Wheat (Units)
A 300 200
B 400 160
C 480 80
The problem of what to produce is the problem of choosing
between the points on PPC. So, through PPC economy can ge
t rid of the problem of what to produce.
If government wants to produce more cotton then governmen
t had to opt point C. Similarly, if economy wants more wh
eat then they will opt point A.
2. How to produce:
This problem refers to choice of technique of production whether
labour intensive or capital intensive, so that efficient use of s
carce resources can be [Link] helps to solve this problem.
All points on PPC, represent fuller utilization of resources impl
ying use of efficient technique of production.
3. For Whom to produce:
This problem relates to distribution of production/income gener
ation. Goods and services produced along PPC would be distribut
ed among the consumers and National income generated through pr
oduction would be distributed among factors of production.
Let A (2, 9) means 2 units of cotton and 9 units of wine
are produced along point 'A' on PPC. When this produce is
sold to consumers, it is personal distribution and when i
ncome earned by sale of goods is distributed among factor
s of production, it is functional distribution.
Combinations on
PPC
● Attainable/Feasible Combination
It refers to those combinations which can be produced wit
h the help of given resources and technology.
• Points on PPC and
• Points inside PPC.
● Unattainable/Non-Feasible Combination
It refers to those combinations which cannot be produced
with the help of given resources and technology.
• Points outside PPC.
Scarce resources mean that the country can only produce combinations of Good X
and Good Y that are found on, or within the PPC. Points A, B, C and D are
attainable.
However, points outside the PPC (point E and F) are unattainable. The limited
resources mean that unlimited wants and needs of the country cannot be fulfilled.
Conclusion
In order to answer this question, we have to clearly understand w
hat a Production Possibility Curve is. From a microeconomic point
of view, "the production possibility frontier represents the poin
t at which an economy is most efficiently producing its goods and
services". Therefore, we can firmly state that a nation's product
ion possibility frontier can shift both in the inward and outward
directions, depending on a situation going on in a specific count
ry. The possibilities curve illustrates the limits that an econom
y has, which drives us to a conclusion that in order to achieve e
fficiency, the proportion of produced goods and services must be
regulated and managed correctly. PPC helps the government to use
the limited resources in an efficient manner. PPC saves resources
as well as money of government and public. That is why I think th
at PPC is a very useful thing.
Bibliography
Books:
• Introductory Micro Economics - Radha Bahuguna.
• NCERT Class XI Micro Economics.
• Introductory Microeconomics - Sandeep Garg.
Internet:
• Google - [Link].
• PPC Wikipedia.
• [Link]
 C U T E

THANK
YOU