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ECONOMICS XII CLASS

ECONOMICS XII CLASS. PRODUCTION POSSIBILITY CURVE. (PPC). COTENTS. DEFINITION OF PRODUCTION POSSIBILITY CURVE. PRODUCTION POSSIBILITY SCHUDLE. PRODUCTION POSSIBILITY CURVE. SHIFT IN PRODUCTION POSSIBILITY CURVE.

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ECONOMICS XII CLASS

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  1. ECONOMICS XII CLASS

  2. PRODUCTION POSSIBILITY CURVE. (PPC)

  3. COTENTS DEFINITION OF PRODUCTION POSSIBILITY CURVE. PRODUCTION POSSIBILITY SCHUDLE. PRODUCTION POSSIBILITY CURVE. SHIFT IN PRODUCTION POSSIBILITY CURVE. CURVE SHOWING UNDER UTILIZATION OF RESOURCES AND FULL UTILIZATION OF RESOURCES.

  4. Objectives • To understand meaning of PPC. • To understand PPC schedule. • To understand PPC. • To understand why it is concave to the origin. • To understand that any point inside it shows under utilization of resources , point on it shows full utilization of resources. • To understand central problems.

  5. PRODUCTION POSSIBILITY CURVE • Production possibility curve is that curve which represents the maximum amount of a pair of goods or services that can both be produced with an economy’s given resources and technique, assuming that all resources are fully employed.

  6. Assumptions of PPC (a) Fixed quantity of factor of production of production. (b) Resources are fully and efficiently utilized. (c) Technology of production remains constant. (d) Assumption of two goods.

  7. PRODUCTION POSSIBILITY SCHUDLE

  8. PRODUCTION POSSIBILITY CURVE P A1 A2 A3 A4 A GOOD A5 O B1 B2 B3 B4 B5 P B GOOD

  9. Two Basic Properties of PPC • (1)Production Possibility Curve Slopes Downwards: Production possibility curve slopes downwards from left to right. It is because in a situation of fuller utilization of the given resources, production of both the goods can not be increased. More of good-Can be produced only with less of good-Y. • (2) 1)Production Possibility Curve is concave to the point of origin; It is because to produce each additional unit of good-X, more and more unit of good-Y will have to be sacrificed than before. Opportunity cost of producing every additional unit of good –X tends to increase in terms of loss of production of good-Y.In other words, production will obey the Law of Increasing opportunity cost

  10. P1 GROWTH OF RESOURCES P A GOOD Initial Resources P o P1 B GOOD

  11. Full Utilization of resources Unattainable combination of output . P W . Y . S . . . . A GOOD Z E . Under utilization of resources P O B GOOD

  12. OPPORTUNITY COST • Opportunity Cost:- Opportunity Cost refers to value of a factor in its next best (or second best) alternative use. Y A Use-1 value of output Rs.6000 O B X Use-2 value of output Rs. 5000 Opportunity cost of employing resources in use -1=loss of out put in next best alternative use of the given resources which is Rs. 5000 in use -2

  13. Evaluation Define P.P.C. ? What does slope of P.P.C show ? What does the point inside the P.P.C. show ? What does the shifting of P.P.C show ? Can you show the central problems through the P.P.C ?

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