PPC and Opportunity Cost
Opportunity Cost of a product is the alternate option that must be given up in order to produce the given product. The concept of opportunity cost can be seen in PPC. In the above example, the opportunity cost of producing more Oranges is less Apples. As we move from points D to E, the production of Orange increases from 3 units to 4 units, but the production of Apples decreases from 9 units to 5 units. It means that the opportunity cost of the 4th unit of Orage is sacrifice of 4 units of Apples.
Production Possibilities Curve (PPC) : Meaning, Assumptions, Properties and Example
As the resources available around us are scarce, we cannot satisfy all of our needs and wants. And even if all the resources in the economy are utilized in the best possible manner, their capabilities are restricted due to scarce resources. Therefore, we are forced to make economic decisions and choose among alternate goods and services to satisfy our wants in the best possible manner. Hence, society has to decide what to produce out of the infinite possibilities. The graphical presentation of this range of possibilities is known as Production Possibility Curve (PPC) or Production Possibility Frontier (PPF).
Table of Content
- What is Production Possibility Curve?
- Assumptions of PPC
- Example of Production Possibility Curve
- Properties of PPC
- PPC and Opportunity Cost
- Change in PPC (Shift and Rotation)
- Production Possibility Curve – FAQs
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