A production possibility curve (PPC) is a graphical or diagrammatic illustration of all possible bundles or combinations of two types of goods which a society can produce using its present level of resources and given the existing level of technology.
The idea behind the production possibility curve is that in order to produce a particular commodity, the production of another commodity has to be sacrificed.
For example, the production possibility curves for the production of cattle and motor vehicles in South Africa.
Production Possibility Table for The Production of Cattle and Motor vehicles by South Africa
|Possible combination||head of cattle||no of motor vehicles|
The table shows the alternative open to South Africa to substitute the production of cattle for vehicle on a monthly basis, assuming a given state of technology and a given total of resources.
INTERPRETATION OR POINTS TO NOT FROM THE GRAPH
- Points A to F on the graph indicate efficient use of resources
- At points O and P (outside the curve), production is not feasible. Production of these points is not feasible due to the limited resources and technology.
- At point K and L (inside the curve), production is feasible. It represents where resources are not efficiently utilized.
- The downward slope of the PPC indicate that there is an opportunity cost of producing more of one type of commodity and less of the other due to limited resources and technical know how