Production Possibility Curve in Economics – Microeconomics Class 11 Notes

Production possibility Curve class 11 notes are presented in an inclusive manner so that students can engage with them properly and make proper answers for every type of question.  All the relevant concepts are given below you can click on the relevant point to get detailed explanation.

• Production possibility Curve
  • What is Production possibility Curve
  • Operation of PPC
  • Assumptions of Production possibility Curve
• Operation of the economy on PPC
• Marginal Rate of Transformation
• Characteristics of production possibility Curve

Production Possibility Curve

Due to scarcity of resources, society cannot satisfy all its wants. In an economy, even if all the resources are used in the best possible manner, the capabilities of the economy are restricted due to the scarcity of resources. Thus, society has to decide what to produce out of an almost infinite range of possibilities. This is where the concept of the Production Possibility Curve (PPC) comes into the picture.

What is Production Possibility Curve (PPC)?

Production Possibility Curve (PPC) is the graphical representation of the possible combinations of two goods that can be produced with given resources and level of technology.

Since the choice is to be made between infinite possibilities, economists assume that there are only two goods being produced. The PPC is the locus of various possible combinations of two goods that can be produced with given resources and technology.

The Production Possibility Curve is also known as the Production Possibility Frontier, Production Possibility Boundary, Transformation Curve, Transformation Frontier or Transformation Boundary.

Operation of PPC

1. Change in PPC: When the useful limit (assets or innovation) for both goods changes, PPC will move.
2. PPC rotation: When there is a change in the useful limit (assets or innovation) in just one descent, PPF will rotate.

Change in PPC

Class 11 microeconomics chapter 1 notes discuss the change in PPC as follows;

When both products undergo innovation or a change in assets, the PPC can shift either to the right or the left.

1. PPC’s Rightward Shift: when I get there. If “Development of Resources” or “Headway or Upgradation of Technology” applies to both products, PPF will shift to the right side.
2. PPC’s Leftward Shift: When there is a decline in assets for both products and an innovative debasement, PPF will shift to the left.

Rotation of PPC

Production possibility Curve class 11 traces the rotation of PPF as follows;

It occurs when a change in a single good’s useful limit (assets or innovation) occurs. The item on the X-axis or the Y-axis can undergo rotation.

The X-axis rotation: PPF will pivot to one side whenever an innovative improvement or asset increase is needed to make the product on the X-axis. In any case, the PPF will move to the side if innovative corruption occurs or assets used for creation decrease.

On the Y-axis, rotate: An imaginative improvement or addition in resources for the making of an item on the Y-axis will turn the PPF to the right.

In any case, the PPF will shift to the left side in the event of innovation corruption or a decrease in manufacturing assets.

Assumptions for Production Possibility Curve (PPC)

The concept of the Production Possibility Curve is based on the following assumptions –

1. The amount of resources in an economy is fixed. Although, these resources can be transferred from one use to another.
2. Using the given resources only 2 goods can be produced.
3. These resources are fully and efficiently utilized.
4. Resources are not equally efficient in the production of both goods. Therefore, when resources are transferred from one product to another, their productivity or efficiency in production decreases.
5. The level of technology is constant.

Let us consider an economy where two goods, good X and good Y are produced is produced. The production Possibility Curve is given below for such a situation.

With the given resources, many combinations of the two goods can be produced in the economy. If X_A amount of Good X, it will be possible to produce only Y_A amount of Good Y. Similarly for X_B amount of Good X, only Y_B amount of Good Y can be produced.

This means that more of one good can be produced by sacrificing the other. To produce one more unit of Good X, less of Good Y can be produced. When all these points of different combinations of production of the two goods are joined, they form a Production Possibility Curve.

Operation of the Economy on the Production possibility Curve

The PPC shows the maximum available possibilities which an economy can produce. The point on the PPC where the economy operates depends on how well the resources are utilised. If the resources are fully utilised the economy may operate at any point on the PPC according to the amount of each good produced. This is shown by points A and B in the diagram given above. If the resources are not utilised fully and efficiently, the economy will operate inside the PPC. This is shown by point C in the diagram. Both of these situations are attainable combinations. On the other hand, the economy cannot operate at any point outside the PPC as, with the given amount of resources, it is impossible for the economy to produce any combination more than the given possible combinations. This is shown by point D in the diagram given above. Such situations are known as unattainable combinations.

Marginal Rate of Transformation (MRT)

Marginal Rate of Transformation (MRT) is the ratio of the number of units of a commodity sacrificed to gain an additional unit of another commodity.

MRT = ΔUnits Sacrificed/Δ Units Gained

Consider the given economy, where only guns and butter are produced,

In the given example, 20 units of guns and 1 unit of butter can be produced by utilizing the resources fully and efficiently. If the economy decides to produce 2 units of butter, then it would have to cut down on the production of guns by 2 units.

Characteristics of Production Possibility Curve (PPC)

1. PPC slopes downward – PPC shows all the maximum possible combinations of two goods which can be produced with the available resources and technology. Therefore, more of one good can be produced only by taking resources from away from the production of another good. There exists an inverse relationship between the change in the quantity of one commodity and the change in the quantity of another commodity. Therefore, PPC slopes downward from left to right.
2. PPC is concave shaped – PPC is concave shaped because more and more units of one commodity are sacrificed to gain an additional unit of another commodity i.e. Marginal Rate of Transformation (MRT). This is because no resource is equally efficient in the production of all goods.

Conclusion

What is Production possibility Curve class 11 notes can form a strong foundation for the upcoming subject matter. These notes define the working of the production possibility Curve in the best way possible. It helps the students to get comprehensive pointers on finger tips for revision and last-minute understanding.

Multiple choice questions 

1. The society has to decide what to produce out of an almost infinite range of possibilities due to : –
   1. Scarcity of resources
   2. Abundance of resources
   3. Non availability of resources
   4. All of the above
2. A PPC Curve is : –
   1. Sloping downwards
   2. Sloping upwards
   3. Concave Shaped
   4. Both A and C
3. PPC is concave shaped because more and more units of one commodity are ———- to gain an additional unit of another commodity.
4. Marginal Rate of ……..  is the ratio of the number of units of a commodity ——- to gain an additional unit of another commodity.

Solutions

1. 1
2. 4.
3. Sacrificed
4. Transformation, sacrificed