Production Possibility Curve

Production Possibility Curve

Production Possibility Curve is a graphical representation of amount of two different goods that can be obtained by shifting resources from the production of one to the production of the other.

Example: A new shoe company has been set up in Bangalore. They produce only leather shoes and leather belts. The raw materials are also fixed.

The company can produce 1000 pairs of shoes if they don’t produce any leather belts, and on the other hand they can produce 3000 units of belt if they don’t produce any shoes.

Recently the company received huge demand for leather shoes. So the company increased the production of shoe from 1000 to 5000 pairs by decreasing the production of belts from 3000 to 1500 units. This is known as Production Possibility Curve.