Question

Write the assumptions taken behind PPC.

Answer 1

The assumptions of Production Possibility Curve (PPC) are:

1.The amount of resources are fixed in an economy. Though they can transferred from one use to another.

2.The level of technology used is constant.

3.The resources are fully and efficiently utilised.

4.With the amount of resources in hand, only two goods can be produced.

5.Resources are not equally efficient in the production of all products. So when the resources are transferred from one use to another, the productivity decreases.