Question

What is a PPC? Discuss the problem of under-utilization and full employment of resources with the help of a PPC.

Answer 1

Production possibility curve shows the different combinations of the production of two commodities that can be achieved in an economy given the resources and technology which are to be fully utilized.

• When there is under-utilization of resources, then the production of the commodities is not maximized and the production takes place inside the PPC, which implies inefficient production.
• When there is full-utilization of resources, then the production of the commodities is maximized and the production takes place on the PPC, representing efficiency in the production of the economy.