CBSE Class 12 Economics Production Possibilities Curve

CBSE Class 12 Economics-Production Possibilities Curve. Students can download the specific chapters from the CBSE and NCERT text books from studiestoday.com. Please refer to the attached file to access the chapters. The books and specific chapters have been collected by the tutors on studiestoday for the benefit of CBSE students. They can access these chapters anywhere and use them for their studies.

INTRODUCTORY MICROECONOMICS

UNIT-I

PRODUCTION POSSIBILITIES CURVE

The production possibilities (PP) curve is a graphical medium of highlighting the central problem of 'what to produce'. To decide what to produce and in what quantities, it is first necessary to know what is obtainable. The PP curve shows the options that are obtainable, or simply the production possibilities.

What is obtainable is based on the following assumptions:

1. The resources available are fixed.

2. The technology remains unchanged.

3. The resources are fully employed.

4. The resources are efficiently employed.

5. The resources are not equally efficient in production of all products. Thus if resources are transferred from production of one good to another, the cost increases. In other words marginal opportunity cost increases.

The last assumption needs explanation because it determines the shape of the PP curve. If this assumption changes, the shape changes.

Efficiency in production means productivity i.e. output per unit of an input. Let the input be worker. Suppose an economy produces only two goods X and Y. Suppose a worker is employed in production of X because he is best suited for it. The economy decides to reduce production of X and increase that of Y. The worker is transferred to Y. He is not that efficient in production of Y as he was in X. His productivity in Y will be low, and so cost of production high.

The implication is clear. If the resources are transferred from one use to another, the less and less efficient resources will be transferred leading to rise in the marginal opportunity cost which is technically termed as marginal rate of transformation (MRT).

What is MRT?

Marginal Rate of Transformation (MRT)

To simplify, let us assume that only two goods are produced in an economy. Let these two goods be guns and butter, the famous example given by Samuelson. The guns symbolize defense goods and butter, the civilian goods. The example, therefore, symbolizes the problem of choice between civilian goods and war goods. In fact it is a problem of choice before all the countries of the world.

Suppose if all the resources are engaged in the production of guns, there will be a maximum amount of guns that can be produced per year. Let it be 15 units (one unit may be taken as equal to 1000, or one lakh and so on). At the other extreme suppose all the resources are employed in production of butter only. Let the maximum amount of butter that can be produced is 5 units. These are the two extreme possibilities. In between there are others if the resources are partly used for the production of guns and partly for production of butter. Given the extremes and the in-between possibilities, a schedule can be prepared. It can be called a production possibilities schedule.


Please refer to the link below for - CBSE Class 12 Economics-Production Possibilities Curve

Tags: 

 


Click to View or Download pdf file
Click for more Other Subjects Study Material

Latest NCERT & CBSE News

Read the latest news and announcements from NCERT and CBSE below. Important updates relating to your studies which will help you to keep yourself updated with latest happenings in school level education. Keep yourself updated with all latest news and also read articles from teachers which will help you to improve your studies, increase motivation level and promote faster learning

CBSE Reduced Syllabus Class 11 and 12

CBSE has announced major reduction in the syllabus for class 11 and class 12. There has been major changes too in the main syllabus for class 11 and 12. The prevailing health emergency in the country and at different parts of the world as well as the efforts to contain...

Procedure for correction in Name and Date of Birth

Procedure for correction in Name and Date of Birth in CBSE records Name Change: Applications regarding changes in name or surname of candidates will be considered provided the changes have been admitted by the Court of law and notified in the Government Gazette before...

CBSE Reduced Syllabus Class 9 and 10

The prevailing health emergency in the country and at different parts of the world as well as the efforts to contain the spread of Covid-19 pandemic has resulted in loss of class room teaching due to closure of schools. Therefore the CBSE Board has decided to revise...

Board Cancelled Official CBSE Statement

Keeping in view the requests received from various State Governments and the changed circumstances as on date, following has been decided- 1. Examinations for classes X and XII which were scheduled from 1st July to 15th, 2020 stand cancelled. 2. Assessment of the...

Class 10 Datesheet announced

CBSE has announced the date sheet for the remaining class 10 Board Exams, see dates below

Board Exams Class 10 and 12 Notification by CBSE

Because of the prevailing condition of spread of COVID-19 pandemic in the country, special efforts are required for conducting examinations in a safe manner. As a number of students have shifted from the district of their school to some other district in the country,...

×
Studies Today