The Production Possibility Curve

Understanding microeconomics is the base of the whole economics, and the basis of the microeconomics is the production of goods. i.e. what to produce?, how to produce? and for whom to produce?. As the resources are scarce, it is very important to decide which product should be given priority for production. The Production Possibility curves help to decide the priority or actual combination of the goods to be produced.

suppose we have two- good economy. With the help of various resources like capital and manpower available, we are able to produce two kind of goods suppose X ( computer) and Y ( microwave oven). As the capital and manpower is limited, we have to decide how much amount of X and Y to be produced , so that it help to meet the optimum requirement of the people. suppose following are the various possibilities.

let the maximum production capacity of X be 75 lakh pieces an year and maximum production capacity of Y be 30 lakh pieces and year. If we want to achieve maximum production of the Product X, all the workforce and the labour has to be applied for the production of the product X, the production of the product Ywill be zero and vice-versa.

possibility	Product X( Pieces in lakh)	Product Y( pieces in lakh)
1.	75	0
2.	60	5
3.	45	15
4.	30	20
5.	15	25
6.	0	30

The various combination will be analysed and according to the requirement any one possibility will be opted for the production. In this way the economy achieves optimum production to fulfill the needs of the population. A graph can be drawn between the two variables of the production X and Y. The curve we obtain between these two possibilities is known as the production possibility curve. 

Production Possibility Curve

The curve has the negative slope because as production of the product increases, the production of the product X decreases. 

One of the most important point  to consider is that this level of production is possible only if the full utilisation of the workforce and labour is done. But in the countries like India, where the unemployment is huge, maximum utilisation of the labour and the capital goods is not possible. In such scenario Point C shows the level of production in the economy. The maximum production can't exceed the boundary of the curve. Also it is imperative to note that point D is impossible to achieve. The curve is also known as production possibility frontier.