Production Possibilities Curve:

A production possibilities curve (PPC) shows the various combinations of two goods that can be produced in a country when all available resources are fully and efficiently utilized.

The production possibilities schedule presented in Table is shown graphically as production possibilities curve in Figure 1

The PPC in Figure 1.1 is drawn under the assumption that the society is using all its resources to produce only two goods - rice and butter .

i) Scacity. The boundary formed by the curve joining points A and F indicates that there is limit to the amount of both rice and better, the country can produce, at any point in time, with available resources and technology.

(ii) Full - employment. Any point on the PPC (such as A to F) shows the combinations of the two goods that the economy can produce given that all available resources are fully and efficiently utilized.

(iii) Unemployment or underemployment. Any point inside the PPC, such as G. Shows that some resources are either left completely idle (unemployed) or are not efficiently utilized (underemployed).

(iv) Unattainable output level. Any point outside the curve, such as H, shows the output level that cannot be achieved by the country.

(v) Opportunity cost. The slope of the PPC usually referred to as marginal rate of transformation
(MRT) measures the opportunities cost of a unit more or less of a commodity.

(vi) Economic growth. It can be defined as a sustained increase in the production capacity of an economy which leads to a greater output of goods and services.