Explanation
When economy produces 15 eggs, it has the required resources to produce 6 hot pockets. So if it produces less hot pockets with the same production of eggs, the economy has to under utilize the supplied resources.
The slope of production possibility curve represents the marginal opportunity cost, which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. So if PPC is a straight line it indicates constant slope, i.e. constant marginal opportunity cost.
Positive statements refers to those statements that describe matters which have been proven through facts and figures after careful observations and are verifiable. It is not concerned with moral and ethical considerations and is free from value judgments.
The central problems of an economy deals in the production of goods as resources are scarce so there is need to answer some questions where it is decide that :
The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that needs to be made when resources and technology are shifted from production of one commodity to the other. Therefore, if marginal opportunity cost remains constant then PPC will be a straight line owing to constant slope.
Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with given the resources and technology which are to be fully utilized. So it helps us to understand how the scarce resources are efficiently utilized in order to satisfy the wants of the people.
Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with given the resources and technology which are to be fully utilized. It sets a comparison between two goods which can be produced with the given resources.
Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with given the resources and technology which are to be fully utilized. When the resources are reduced due to some economic distortion or calamity in the economy then the production of commodities also decreases as they use these resources to develop the commodities. Therefore, if the production of the commodities decreases it leads to inward shift in the production possibility curve.
Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced at the maximum in an economy at a given period of time with given the scarce resources and technology which are to be fully utilized.
Scarcity of resources refers to the situation where resources are limited in quantity and have alternative uses in production of various commodities. So the problem of these scarce resources is reflected in the aggregate supply of the economy which is also limited owing to limited source of inputs and unlimited demands as human wants are unlimited.
Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with given the resources and technology which are to be fully utilized. So any point that lies beyond the production possibility curve like Point R cannot be achieved with the provided resources and technology.
Alfred Marshall was a British economist who proposed the definition of welfare according to which economics should be a science of creation of welfare for both human as well as society believed that the subject studies the creation of materialistic things in the economy for personal gains which is not good for the welfare of the society. Therefore, he proposed a normative definition on economics.
Positive statements refers to those statements that describe matters which have been proven through facts and figures after careful observations and are verifiable.
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