The purpose of a production possibilities curve is to show the between the production of two things.

trade-off

Explanation:

It a curve that shows the maximum number of possible units a firm can produce if it only produces two products using all of its resources efficiently. or is a graphical representation of different combinations of two goods which can be produced by an economy by using of limited resources.

If a company wants to produce a particular product, then they have to reduce the production of some other commodity for economic growth.

Example: Gideon Company Ltd is known for producing and selling pens and books. Their resources for producing the two products are fixed.

The company can produce 2000 books if it doesn’t produce a single pen. Likewise, it can produce 1,500 pens if it doesn’t produce a single book. Currently, it is producing 1,000 books and 800 pens.

The company has recently received more demand for books, so directors decided to increase the production of books from 1,000 units to 1,500 units by reducing the output of pens from 800 units to 500 units. The opportunity cost for producing 1,500 units of books becomes the 300 units of forgone pens.

Example 2. For example, say an economy can produce 20,000 oranges and 120,000 apples. If it wants to produce more oranges, it must produce fewer apples.

By describing this tradeoff, the curve demonstrates the concept of opportunity cost. Making more of one good will cost society the opportunity of making more of the other good. The production possibility curve delineates the cost of society's choice between two different goods.

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