The Production Possibility Curve

Production Possibility Curve and Increasing Opportunity Cost:

• The production possibility curve is a hypothetical representation of the two different goods that can be obtained by shifting resources from the production of one to the production of the another.
• This curve is used to describe a society choice between the different goods.
• In expanding the production of any goods first employe those resource with the lower opportunity cost and only afterwards, then to resource with higher opportunity cost.
• This can be explained with the help of a Suzuki Company Production Possibility Curve.

Suzuki Automobile Company:

• Suzuki is India's largest Two Wheeler and Four Wheeler Manufacturer presenting latest and best in mileage.
• The company can produce two different goods by shifting resources from the production of one to the production of another.
• The amount of difference between Bikes and Cars by shifting of resources are below:

Units Of Bikes (Millions)	Units Of Cars (Millions)
8M	0.0M
7M	2.2M
6M	4.0M
5M	5.5M
4M	5.6M
3M	6.0M
2M	6.4M
1M	6.7M
0M	7.0M

• The above table shows the difference between the Bikes and Cars by shifting the resources from the production of Bikes to the production of cars.
•  It shows that the society is choosing cars than Bikes.
• The graphical representation of the table is given below.

    

• The above graph shows the Production Possibility Curve that the society is choosing more Cars than Bikes so the company has shifted the resources from the production of bikes to the production of cars.
• The opportunity cost will also increase by the shift in the resources.