Answer to Question #287569 in Economics of Enterprise for jyo

Question

The Production Possibility Curve is a constrained diagram, showing the maximum production capacity of a country". Using examples of your choice, discuss the validity of the statement. 

Answer 1

A society, just like an individual, cannot have everything that it may want due to various constraints. Further, a country cannot produce everything it wants due to limited resources such as capital raw materials, land and labor. Suppose a country desires to produce product A (Healthcare) and product B (Education). If the country were to channel all resources to producing Healthcare, it would have high output but would have no resources left to produce Education.

Therefore, the country could choose to produce any combination of Healthcare and Education, inside the PPC curve that would ensure maximum production.