1. WHAT ARE THE CENTRAL PROBLEMS OF AN ECONOMY? WHAT TO PRODUCE? 1. CONSUMER GOODS 2. CAPITAL GOODS HOW TO PRODUCE? 1. LABOUR INTENSIVE USAGE (L>K) 2. CAPITAL INTENSIVE USAGE (K>L) FOR WHOM TO PRODUCE? 1. PERSONAL DISTRIBUTION 2. FUNCTIONALDISTRIBUTION GROWTH OF RESOURCES

2. WHAT IS PRODUCTION POSSIBILITY CURVE? ALSO KNOWN AS TRANSFORMING LINE/CURVE DIFFERENT COMBINATIONS OF A PAIR OF GOODS WHICH CAN BE PRODUCED WITH THE GIVEN RESOURCES. ASSUMPTIONS 1. RESOURCES ARE FULLY AND EFFICIENTLY UTILIZED. 2. TECHNIQUE OF PRODUCTION REMAINS CONSTANT. SHOWS THE LIMIT OF WHAT CAN BE PRODUCED WITH PRESENT RESOURCES. 0 1 2 3 4 5 0 50 100 150 Cloth Wheat 3. WHEN WILL THE PRODUCTION POSSIBILITY CURVE SHIFT? INCREASE IN RESOURCES DECREASE IN RESOURCE 0 1 2 3 4 5 0 50 100 150 Cloth Wheat 0 1 2 3 4 5 0 50 100 150 Cloth Wheat 4. WHEN WILL THE CURVE ROTATE? EFFICIENT TECHNOLOGY FOR GOOD ON X-AXIS OR EFFICIENT TECHNOLOGY ON Y-AXIS IN CASE THE EFFICIENT TECHNOLOGY IS INTRODUCED FOR BOTH THE COMMODITIES, PPC SHIFTS PARALLEL UPWARDS. 0 1 2 3 4 5 0 50 100 150 Cloth Wheat 5. WHAT ARE THE BASIC PROPERTIES OF PPC? 1. PRODUCTION POSSIBILITY CURVE SLOPES DOWNWARDS 2. PPC IS CONCAVE TO THE ORIGIN THEREFORE, THIS LAW WORKS ON THE PROPERTY OF INCREASING OPPORTUNITY CURVE. 0 1 2 3 4 5 0 50 100 150 Cloth Wheat 6. OTHER POSSIBILITIES DECREASING OPPORTUNITY COST CONSTANT OPPORTUNITY COST 0 1 2 3 4 5 0 50 100 150 Cloth Wheat 0 1 2 3 4 5 0 20 40 60 80 100 Wheat