Ans. It is possible to produce more of both products. d. positively sloped with a convex curvature. State its economic value in the context of production possibilities frontier. If all the resources are used in producing A, then 100 lakh units of A can be produced, whereas if all the resources are used in producing B, then 4000 units of B can be produced. This preview shows page 1-8 out of 8 pages. PPC is concave to origin. Briefly put (i) Microeconomics is the study of individual economic units like a consumer, a firm (producer) whereas macroeconomics is the study of economy as a whole and its aggregates like national income, total employment, general price level. The negative slope of the production possibilities curve is a graphical way of indicating that: ... A typical concave (bowed out from the origin) production possibilities curve implies: the combinations of two goods that can be produced with society's available resources. Let us learn Production Possibility Curve with the help of an example.. The concave curve PP 1 depicts the various possible combinations of the two goods, P, В, C, D and P 1. An econ­omy that is op­er­at­ing on the PPF is said to be ef­fi­cient, mean­ing that it would be im­pos­si­ble to pro­duce more of one good with­out de­creas­ing pro­duc­tion of the other good. Production possibility curve is a graphical representation of the maximal mix of outputsthat an economy can achieve using its existing resources to full extent and in the mostefficient way. cloth and wheat. 2379 Views Answer: (a) Concave to the origin. (v)    Microeconomics deals with determination of prices of individual goods and individual factors of production but macroeconomics deals with general price level and nation's incomes. Both these factors will lead to better and efficient utilisation ofexisting resources of an economy. Answer: The slope of the production–possibility frontier (PPF) at any given point is called the marginal rate of transformation (MRT). In business, the Production Possibility Curve (PPC) is applied to evaluate the performance of a manufacturing system when two commodities are manufactured together. • From point D, an increase the production of capital goods requires a decrease in the amount of consumer goods. This discussion on when is production possibility curve convex to the origin? Which of the following is true if the production possibilities curve is a curved line concave to the origin? It forms a shape that looks like a cave or a rainbow. That is, as we move down along the PPC, the opportunity cost increases. If the curve bends inward, it will look more like a smile ⁠— That would be a convex curve. The problem can be categorised under two main heads:(i) Personal Distribution: It means how national income of an economy is distributed among different groups of people. And this causes the concave shape of PPC. Combinations of output that are inside the production possibilities … Answer. And this causes the concave shape of PPC.   Terms. PPC is concave to the origin because of increasing Marginal opportunity cost. [10] The slope of a production possibility curve falls: (a) From left to right (b) From right to left (c) From top to bottom (d) From bottom to top. A PPF (pro­duc­tion pos­si­bil­ity fron­tier) typ­i­cally takes the form of the curve il­lus­trated above. (iii) Complementary Products: Two products say, Y 1 and Y 2 are complementary if inputs used to bring about an increase in the output of say product Y 1 also lead to an increase in the output of products Y 2 though not in the same proportion throughout. C. a straight line with a negative slope. Download the PDF Question Papers Free for off line practice and view the Solutions online. that society is using a market system to allocate resources. In this case the opportunity cost curve is a negatively sloping convex curve to the origin. (iii) Main tools of microeconomics are demand and supply of the particular commodity/ factor whereas tools of macroeconomics are aggregate demand and aggregate supply of the whole economy. Why does the production possibility curve tend to be concave to the origin? The production possibility curve bows outward. If the curve bends inward, it will look more like a smile ⁠— That would be a convex curve. As initially, the production in the economy is below its potential due to unemployment, this suggests that the economy is operating at a point below the Production Possibility curve (PPC). In such a situation, the opportunity cost curve is a negatively sloping concave curve to the origin. The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. A. That is, as we move down along the PPC, the opportunity cost increases. Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost which leads to the concave shape … © The economy produces 140,000 apples and zero oranges. 2020 Zigya Technology Labs Pvt. A concave curve is one that bends outward from the origin. produces only two goods. PRODUCTION POSSIBILITY CURVE (ISO-RESOURCE CURVE) 200 The production possibility curve or product transformation curve is the locus of maximum amounts of two products, say Y 1 and Y 2, that can be produced from a given quantity of resources (X (0)). As we move down along the PPC, to produce each additional unit of one good, more and more units of other good need to be sacrificed. Production Possibility Curve is the curve which shows the combinations of two goods and services that can be produced with fuller utilisation of a given amount of resources in the most efficient way and with a given production technology. Ltd. Download books and chapters from book store. Each transformation curve or production possibility curve serves as the locus of production combinations which can be achieved through allocated quantities of resources. It is this principle of increasing opportunity cost that makes the production possibility curve concave to the origin. B. that society must choose among various attainable combinations o C. decreasing opportunity costs. Hence, economic value is reflected in terms of increased output and income. The Questions and Answers of when is production possibility curve convex to the origin? • The slope of the PPF curve is also called the marginal rate of transformation (MRT). Production Possibility Curve (PPC) is concave to the origin because marginal opportunity cost of shifting resources from commodity Y to commodity X tends to rise. Answer. The slope of the production possibilities curve becomes steeper (going left to right), demonstrating increasing opportunity cost. It is also known as Transformation curve. If all the resources are put to produce cloth, then the maximum of cloth will be produced, per year, is 5 million, with all the resources at, Alternatively, if all the resources are used for, the production of wheat, we can produce 15. Since resources are scarce in every economy, no society can satisfy all the wants of its people. are solved by group of students and teacher of Class 12, which is also the largest student community of Class 12. What will be the impact of recently launched 'Clean India Mission' (Swachh BharatMission) on the Production Possibilities curve of the economy and why?Or. If the production possibilities curve is concave from the origin, then economists say that C. resources are not equally suited for the production of both goods. b. all resources are Marginal opportunity cost tends to rise because the factors of production are not perfect substitute of each other. It is because of this increasing opportunity cost that the curve is concave to the origin – that is, it bulges outwards from the origin. Production Possibilities. Since the choice is to be made between infinite possibilities, economists assume that there are only two goods being produced. 1. The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. Suppose an organisation decided to produce two goods A and B with its available resources. This will lead the Production Possibility Curve to be convex to origin. In con­trast, if the econ­omy is op­er­at­ing belo… Consequently it leads to healthy India and increasedindividual productivity. Points within the curve show when a country’s resources are not being fully utilised Economic recourses are not completely adaptable to alternative uses. The bowed-out shape of the production possibilities curve results from allocating resources based on comparative advantage. Concave ppc shows increasing opportunity cost Increasing opp cost is created when the production factors used within the production process are homogenous or highly job specific..this means tht a combination of productn factors used to produce a certain product cannot be efficiently used to produce another product. Because in a situation of full employment of resources, production of one good can be increased only with sacrifice of some quantity of other good. The basic issue on the Keynesian-neoclassical controversy is regarding the shape of the AS curve Production Possibility Curve (PPC) will be concave to the origin because of the increasing opportunity cost. Let us learn Production Possibility Curve with the help of an example.. A production possibilities curve shows the combinations of two goods an economy is capable of producing. The slope defines the rate at which production of one good can be redirected (by reallocation of productive resources) into production of the other. The Production Possibility Frontier • A move along the curve illustrates the concept of opportunity cost.   Privacy This movement is being depicted in the below graph with the help of thearrow from point P. The large scale outflow of foreign capital will lead to a decrease in the availability ofresources, thereby shifting the Production Possibility Curve (PPC) from right to left that isfrom AB to CD as shown in the following diagram. Guiding Principle of ‘For whom to Produce’: Ensure that urgent wants of each productive factor are fulfilled to the maximum possible extent. On the chart, that is Point A. Why is production possibility curve (PPC) downward sloping from left to right? It shows an increasing slope because more and more of commodity Y is to be sacrificed for every additional unit of commodity X. ... opportunity cost of the other product increases i.e. The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. Mathematically, such product transformation curve is represented by: Y 1 = f (Y 2, X (0) ) or Y 2 As the economy produces more and more of a good, it has to use resources that are less and less suitable for producing the good to actually produce the good. Answer. An outward shift of the PPC results from growth of the availability of inputs, such as physical capital or labour, or from technological progress in knowledge of how to transform inputs into outputs. Points within the curve show when a country’s resources are not being fully utilised The curve is bow-shaped for a few reasons. This is the production possibility curve which is also known as the transformation curve or production possibility frontier. e bowed inward toward the origin. Why is production possibility curve (PPC) downward sloping from left to right? Why? A concave curve is one that bends outward from the origin. As the government starts employment generation schemes, the unemployed resources get utilized. Such a shift reflects, for instance, economic … Resources are perfectly substitutable between the production of the two goods B. A typical concave (bowed out from the origin) production possibilities curve implies: A. that economic resources are unlimited. Analyzing the demand with market economies. Answer (1 of 1): A Production Possibility curve is basically a graphical representation that shows various maximum combination of output that a country can produce with limited economic resources in a fixed period of time. Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing … Slope of PPC IS? is done on EduRev Study Group by Class 12 Students. PPFs are normally drawn as bulging upwards or outwards from the origin, but they can be represented as bulging downward or linear, depending on a number of assumptions. Delhi - 110058. If all the resources are used in producing A, then 100 lakh units of A can be produced, whereas if all the resources are used in producing B, then 4000 units of B can be produced. Accordingly, the economy will move higher and closerto initial PPC. As we move down along the PPC, to produce each additional unit of Good X, more and more units of Good Y needs to be sacrificed. Production possibility curve is concave to the origin. The production possibilities curve is bow-shaped precisely because there reaches a critical point at which the produciton of less guns means the possibility for more butter, and vice versa. Answers.com ® Categories Science Math and Arithmetic Statistics Why does the production possibility curve tend to be concave to the origin? 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