The point on and off the Production Possibility Curve
Production possibility curve refers to a curve that shows different production possibilities in an economy given the resources and technology. The general shape for any economic production possibility curve is concave to the origin. But what about the situation when any country operates as the point on and off the production possibility curve? Let’s learn.
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Points on the Production Possibility Curve
Any point on the PPC indicates full usage of the resources and technology in the economy.
So, if any country exists on the PPC, it shows the country is functioning effectively or there is full employment in the economy or the full employment of given resources and technology. This is considered to be an ideal situation. As shown below:
This situation is also called achievable or feasible point.
Points off the Production Possibility Curve
Any point off or inside the PPC indicates that the country is under utilising its existing resources and technology. It also indicates wastage of resources and existing manpower.
So, if any country exists inside the PPC, its shows country is at underemployment or under utilisation of resources or it is not at its optimum level. As shown below:
This situation is also called achievable or feasible.
Points beyond the Production Possibility Curve.
Any point beyond the PPC indicates over usage of the given resources and technology. It means resources are overutilized as well as technology.
So, if any country exists beyond or outside the PPC, it shows country is at over employment of resources or there is over utilisation of resources. In order to improve, the PPC curve should shift to the right to reach that point. It can only happen if the available resources increases and the technology upgrades. As shown below:
This situation is called unachievable or not feasible point.
You can read more related posts:
- Introduction to Economics
- What do you mean by an economy?
- What are the Central problems of the economy?
- Production Possibility Curve
- What causes PPC to shift?
- What does the opportunity cost mean?
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