What is the meaning of production possibility curve?
Production Possibility Curve... It is an economic tool to solve the problem of scarcity and choice. Production possibility curve is the graphical representation of alternative production possibilities facing on economy. As the total productive resources of the economy are limited, it has to decide about the goods to be produced and their quantities on the basis of priorities and preferences of the society. Increase in production of one commodity requires a reduction of production of other commodity. Let us suppose that the economy produce only two commodities i.e consumer goods and capital goods. In these two commodities also, there are various production possibilities that the economy can produce with its limited resources and technology. A curve which shows these production possibilities is called production possibility curve. Out of various production possibilities, the economy can choose anyone production possibility. A curve which shows this choice is called p...