Production possibility curve

Define production possibility curve

Production curve is also called the production possibility frontier. The production possibility curve shows the maximum output of any product that an economy produces by utilizing the factors of production. The productive resources of an economy can be employed for the production of various alternative goods. As the productive resources are limited, the economy has to choose between different goods. Therefore it has decided which goods to be produced more, which are less.

Schedule:

Production Possibilities| Good x (Cloth) | Good & Wheat)

A----------------------------0------------------5

B----------------------------1------------------14

C----------------------------2------------------12

D----------------------------3------------------9

E----------------------------4------------------5

F----------------------------5------------------0

The alternative product possibilities can be illustrated graphically. The curve AF is called the
production possibility curve, which shows the various combinations of two goods or two classes of goods, which the economy can produce with a given amount of resources. The production possibility frontier AF illustrates that a fully employed economy, An increase in the amount of cloth necessitates a decrease in the amount of wheat. As we move from a towards F on the curve economy sacrifices some units of wheat for having more of cloth. On the other hand, if the economy moves from F towards A, if the economy moves from F towards A, the economy will
be giving up some of cloth for the save of more wheat.