Question 2 (a)
The production possibilities curve
3 marks
- Time to write
- About 6 minutes
Question
Question 2 (a) · 3 marksWhat is Production possibilities curve (PPC)?
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- What isThe meaning first, then the main points.
What the paper leaves open
As printed, the marks (3,7,5) are written once, at the end of part (c), for parts (a), (b) and (c): 3, 7 and 5 marks.
Write it in this order
- 1 Meaning of the PPC 1 mark 1 min
- 2 Assumptions it rests on ½ mark 1 min
- 3 Illustration and what points on, inside and outside the curve show, with opportunity cost 1½ marks 4 min
Easy marks
- Meaning of the PPC (step 1, 1 mark): a definition in one or two lines. It opens the answer, so it takes a minute or two.
Short on time? Step 3 carries 1½ of the 3 marks: guard its minutes.
Try it first. About 6 minutes for 3 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Meaning. The production possibilities curve (PPC), also called the production possibility frontier, shows the combinations of two goods that an economy can produce when it uses all its given resources and its given technology fully. For any quantity of one good, it gives the greatest quantity of the other good that can be produced.
Assumptions. The economy's resources are all in use, with none idle or wasted; they can be moved from producing one good to producing the other; their quantity, and the technology for using them, stay unchanged over the period; and the economy makes only two goods.
Example: wheat and mustard. Our own figures, for a farming district:
| Combination | Wheat (lakh tonnes) | Mustard (lakh tonnes) | Mustard given up for one more unit of wheat |
|---|---|---|---|
| A | 0 | 25 | |
| B | 1 | 23 | 2 |
| C | 2 | 19 | 4 |
| D | 3 | 12 | 7 |
| E | 4 | 0 | 12 |
- Points on the curve (A to E) are output levels at which resources are fully used.
- A point inside the curve, such as 2 of wheat with 12 of mustard, means some resources are idle or wasted.
- A point outside the curve, such as 3 of wheat with 19 of mustard, cannot be reached with the present resources.
- Opportunity cost. The curve slopes downward: more wheat means less mustard, and the mustard given up is the opportunity cost of the extra wheat. Here that cost rises (2, 4, 7, 12), which makes the curve bowed out (concave to the origin), as the usual PPC is.
Where the 3 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Meaning of the PPC | 1 |
| 2 | Assumptions it rests on | 0.5 |
| 3 | Illustration and what points on, inside and outside the curve show, with opportunity cost | 1.5 |
| Total | 3 |
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