Production Possibility Curve (PPC) or Transformation Curve – Indian Economy UPSC Notes

Production Possibility Curve (PPC) or Transformation Curve – Indian Economy UPSC Notes

Production Possibility Curve (PPC) or Transformation Curve The Production Possibility Curve (PPC) , also known as the Production Possibility Frontier (PPF) , represents the maximum combinations of two goods or services that an economy can produce with given resources and technology, assuming full and efficient utilization of resources. Key Features of PPC Scarcity: Resources are limited; hence, producing more of one good requires reducing the production of another. Opportunity Cost: The cost of foregone alternatives when resources are reallocated. Efficiency: Points on the curve represent efficient production, while points inside the curve show inefficiency. Economic Growth: Outward shifts in the PPC signify economic growth. Shape of the PPC Concave to the Origin: Due to the law of increasing opportunity cost ; resources are not equally efficient in producing all goods. Straight Line: Indicates constant opportunity costs, which is rare in real-world scenarios. Diagram Explanation Let’s assume an ec…