Production possibility curve is a graphical presentation of alternative production possibilities facing an economy. It is also known, as production possibility frontier. As our resources are limited we have to choose between various goods. A person has to select which product he produces more and produce less.
Let us assume that there is a given amount of production resources and they remain fixed. We have constructed the following table showing various production possibilities between wheat and cloth. If all the given resources are employed for the production of wheat, it is supposed that 15 thousand guitarist of wheat are produced. On the other hand, if all the resources are devoted to the production of cloth, 5 thousand meter of cloth arc made. But these are the two extreme production possibilities. In between these two there will be many other production such as B, C, D.
With production possibility B, the economy can produce 14 thousand quintal of wheat and meter of cloth. With C, the economy can have 12 thousand and 2 thousand and so on. As we move from A towards F, We draw away some resources from the production of wheat and devote them to the production of cloth. In other words, we give up some units of wheat in order to have some more units of cloth. As we move on from alternative A to B, we sacrifice one thousand motor of cloth. Again our movement from
alternative B to C, involves the sacrifice of two thousand quintal of wheat for the sake of one thousand more motors of cloths.
Schedule of Possible production:
The table shows our sacrifice of wheat goes on increasing as we move from C, towards E. In a fully employed economy more of one good can be. obtained only by cutting down the production of’another good.