Concepts Behind Production Possibility Curve

In a production unit where numerous similar goods are produced, there might be shortage of supplies for the manufacture of some particular goods. In such a scenario, it is considered mandatory to divert the raw materials from the manufacture of one type of goods to the other type, such that the production of both may be carried out without having to stop the manufacture of one of them.  Sometimes, based on the customer trends or preferences, one particular product will be deemed to be inclined more and that product will be the one to be chosen for production.

There are two types of consumer goods for which Production Possibility Curves could be drawn and detected which one could be preferred - those are investment goods and consumption goods.

Investment goods are those that are used by the business in order to manufacture consumption goods.  For example, investment in machinery and equipment is done for the production of goods which are utilized for sales to consumers.

Importance Of Production Possibility Curve In Academic Curriculum

Learning the concepts of Production Possibility Curve should be part of the academic curriculum. Investments of goods in the business and consumption of goods for manufacturing items for the consumers are the two parts of Production Possibility Curve. The capital stock of the business should be known by the students in order to calculate the investment in the business. This is the amount that is brought in as assets in the business and studying about this conveys the concepts of business investment to the students and helps them develop an understanding on the finesse of the trends in business. Through learning the shift in production of goods according to consumer preferences, which is indicated in the Production Possibility Curve, the students expose themselves to the strategies that develop their understanding on the intricacies of this shift in production trends. The consumption pattern of all resources is exhibited as an upward trend along the parallel axis of the graph in the Production Possibility Curve. The Production Possibility Curve also shows the amount that should be invested in order to improve the production of goods.

The Production Possibility Curve is an indicator of demand of a particular product and knowing the best possible outcome of producing some products which are in demand from the customers.

Difficulties Encountered And Faced By Students While Solving The Production Possibility Curve

The most important concept which could be misunderstood by the students is the product which is in demand due to high consumer purchase. The entities which are responsible for creating such demands for products are the nature of the product itself, the necessity of the product and the increased consumer awareness on the availability of the product. These factors should be analyzed by the students appropriately to know how to calculate the demand for the product and to what extent its productivity should be increased in comparison with other products and what measures of raw materials utilized - these are the arenas which require careful implications of students' discretion and where they might commit mistakes.

The students may also find problems arising out of misinterpretation of the product which is of priority among consumers and will try to place it under high production target or divert the raw materials for its production. Such discrepancies will tax the students more and would undermine their efforts. They will find the consequences of such wasted efforts to be fruitless.

Students should also know other factors which determine the Production Possibility Curve and try to relate it better to the overall production targets.

Few Important Topics Covered Under Production Possibility Curve

There are several aspects included in the Production Possibility Curve which highlights the cost of those operations. The Opportunity Cost highlights what sort of values should be compensated to produce a product, for example, in laying machinery, the cost that should be compensated from other expenses.  Law of Increasing Cost focuses on the increased expenses incurred on a product which is in greater demand by the consumers when compared to other products. The law of opportunity and increasing costs are also indicated in the Production Possibility Curve which aims at providing new vistas of knowing the Production Capacity of a product and the manner in which products are prioritized depending on their consumer marketability and demand.

The energy utilized in the production of a product is of utmost importance compared to the feasibility of production and the increased selling power of the product. The capacity of products to be brought under increased Production Possibility is again dependent on the concepts of greater demand leading to high productivity in compensation of the other products' materials and costs.

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