What is production possibility curve or PPC ?

 The Transformation curve or Production possibility curve: What Is It?

A production possibilities frontier is a graph that displays the many combinations of output that the economy may be able to produce given the production technologies and factors that are currently in use.

A production possibilities curve displays many possible pairings of two commodities that can be manufactured with the resources at hand.

This model graphically illustrates efficiency, opportunity costs, trade-offs, and scarcity.

Due to the rising opportunity cost, the Production Possibility Curve (PPC) is concave toward the origin. As we proceed along the PPC, more and more units of other goods must be sacrificed to generate each extra unit of one product. And this is what gives PPC its concave shape.

Economics has three big problems.

They are:

• What to produce?
• How to produce?
• Whom to produce?

PPC provides a response to these queries, including what to generate and for whom.

The nation must first decide on its productive efficiency before deciding on its allocative efficiency.

Productive efficiency is the capacity to provide the greatest output with the fewest resources.

Allocative efficiency requires that we provide the goods and services that the public desires.

The production efficiency is represented by points A and B on the PPC curve.

Butter is placed on the y-axis in the accompanying figure, while the gun is placed on the x-axis.

Points A and B are both feasible and efficient, but point C is both doable and inefficient. But due to a shortage of funding, point D is impractical.

By extension, this means that the PPC curve conveys to producers the idea that they are manufacturing either butter or guns.  Butter is a symbol of consumer goods whereas the gun is a symbol of capital goods. Russia and Ukraine are currently deciding whether to create butter or guns. While creating more butter at point A, point B produces more firearms.

Major Assumptions:

Let us assume the economy is operating at full employment and achieving full production. The available supplies of the factor of production are fixed though they can be shifted or reallocated within limits among different uses. In the economy, only two things are created in varying amounts.

The same resource can be freely transferred between the two items and used in any or both of them.

Factor supplies are predetermined.

The method of production is predetermined or constant.

The resources of the economy are completely utilized.

Production happens over a predetermined amount of time and is based on a short run.

Fixed Assets: Throughout the period, all resource inputs' quantities and characteristics remain constant. The "rules of the game" do, however, permit an economy to divert any resource from the creation of one output and use it to create another. An economy might, for instance, switch workers from making consumer products to making capital goods. Even though the total workforce is unchanged, this labor transfer will result in a decrease in consumer products and an increase in capital goods.

Completely utilized resources: All of the production factors are fully utilized in the economy, which results in the highest output possible without wastage or poor management.

Unchanging technology:  Any economy's ability to produce different kinds and quantities of things is constrained by holding existing technologies in place. Here technology is the body of knowledge applied to how goods are produced.

What causes a curve to slip inward?

The inward shift may be because of improper use of the resource, unemployment inflation, etc. It occurs because of productive inefficiency. For example, if the land of a village which is better suited for the production of wheat is wrongly employed for the production of cotton, the economy is not using the resources efficiently which will result in a loss of output. This will make the PPC curve slip inward.

• Labor Issues
• Land Resource 
• Losses and
• Machinery Failure

What causes an outward movement in the curve?

If there is an improvement in technology or an increment in the employment of skilled labor then the production of guns increases. Thus the curve shifts rightward.

Other possible causes are listed below.

• Enhancement of Resource Quality
• More work (Population)
• An increase in labor productivity
• Better or newer sources
• Better or newer financing
• Better Labor Health or Education
• Technological Progress

 The rapid shift in PPC due to higher capital accumulation can be seen in the figure below.

The straight line away from the origin shows the growth path of the economy. The transformation curve or PPC is away from its origin in good production and towards the origin in developing countries.

Analysis of the PPC

Producers must determine if their output falls inside or outside the curve after drawing the PPC. If it's within, that indicates inefficient production. Their resources are not being used effectively. To achieve the PPC, they must endeavor to use their labor, machine, or another factor of production efficiently.

By examining the curve and making a contribution to lowering unemployment, the government can also find a solution to the issue.

Producers must balance their output to achieve both allocative and productive efficiency since they cannot ignore the requirements of society, which are referred to as allocative efficiency.

Conclusion: To increase in production of one commodity we have to decrease the production of another commodity therefore it is also called the transformation curve. 

The transformation curve(PPC) helps to solve three basic problems: what to produce, how to produce, and for whom to produce.