CBSE Class 12 Economics Solved Question Paper 2017

Short Answer Type

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State the meaning and properties of production possibilities frontier.

Meaning: The production possibility curve is the curve which represents all those combinations of two commodities that can be produced with full utilization of resources in the most efficient way, which give the same level of satisfaction to a consumer.

Properties of PPC:

  1. PPC slopes downwards from left to right: It is because in a situation of fuller use of the given resources, production of both goods cannot be increased simultaneously. for example, More of Good X can be produced only with less production of Good Y.
  2. PPC is concave to the point of origin: It is because to produce each additional unit of Good X, more units of Good Y will have to be sacrificed. Opportunity cost of producing every additional unit of Good X tends to increase in terms of the loss of production of Good Y. Production will act upon the law of increasing marginal opportunity cost.
  3. All points which lie on the PPC are the set of combination of two goods with the full utilization of resources and efficient utilization of technology.

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