PRODUCTION POSSIBILITY CURVE (PPC)

This concept is founded by a great Professor called Paul A. Samuelson, who was the first American to receive a Nobel Prize in Economics in 1970. He was also an economics adviser to the American President, John F. Kennedy for many years. It is also called transformation curve because while moving down the curve, we are in effect transferring one good (say good A) into another good (say good B) by appropriately shifting the resources from one good to another. Points outside the PPC is said to be technologically infeasible or unobtainable.

This is an important economic concept as far as available finite (limited) resources and production opportunities (choices) are concerned. Every country’s aim would be to produce commodities that can be sold in the domestic and in the international markets with a favourable price. In other words, right goods should be produced with right factor inputs at right times.

Definition

Production Possibility Curve (PPC) is a curve that shows the possible combinations of any two economic goods an economy can produce by using the available scarce resources. It is sometimes called Production Possibility Frontier, Production Possibility Boundary and Transformation Curve as the concept illustrates the potential productive capacity of the economy.

Assumptions of the concept – PPC

Economists criticize the concept of PPC on the different grounds since it is based on the certain assumptions like;

1. Human wants are unlimited.
2. The resources are limited but which has alternative uses
3. It takes into consideration the production of only two goods. However, in reality the economy will produce many goods. The life on the earth is not possible only with two goods.
4. It also assumes that the economy has utilized scarce resources efficiently and fully. In other words, the economy is in full employment.
5. PPC is drawn provided that the state of technology is given and it remains constant over the period.
6. Resources available in the economy (which are called factors of production such as land, labour, capital and organizer) are fixed and constant. However, resources can be shifted from one commodity to another.
7. The economy is not able to change the quality of the factors of production. They are also given and constant.
8. It is also assumed that the production only related to short-period rather than long period.


Importance and Application of the Concept

The concept has got the following importance:

1. Since PPC shows the productive capacity of the economy, it gives reliable answers for the fundamental economic problems of what to produce?, How to produce?, and To whom to produce?.

2. Secondly, it illustrates the concept of opportunity cost. Here the country is trying to produce any two goods. So the production of the one commodity can be increased by reducing the production of other good. This is due to the fact that economic resources are scarce. Also opportunity cost ratios can be calculated.

3. Thirdly, it leads to the efficient allocation of scarce economic resources. More resources should be diverted to the commodity that economy demands more than another commodity.

4. It illustrates the productive potential of the economy. The growth of the economy can be judged from the shifts in the PPC. Economics growth in both quantitative and qualitative terms can be known from PPC.

5. It is very useful in order to achieve the social welfare of the community.

6. Last but not least, PPC can be used by the producers to make their decisions regarding the use of factors of production and it assist in the determination of the costs of the production.

PPC, therefore, shows unemployment of resources, Technological Progress, economic growth and economic efficiency. According to Professor Dorfman, PPC explains three efficiencies. They are:

1. Efficient selection of goods to be produced,
2. Efficient allocation of resources in the production of these goods with efficient choice of method of production, and
3. Efficient allotment of the goods produced among consumers.

Usually this concept is applied for individual countries. Also this concept can be applied to the individual companies, farms etc to find out the production possibilities.


(…to be continued with diagrammatical illustrations)

Rihaakuru – A typical Maldivian food

Food habits of the people differ from person to person, city to city, state to state and even country to country. Likewise, Maldivian used to have special types of foods from decades where the origin of those foods is shrouded in mystery.

Rihaakuru (in mother tongue) is one among them. The Americans and English men are still unable to give an ‘English’ term for this special food name. For generations, it is a traditional food used in maldive and minicoy islands.

This food is made from the fish and fish extracts (except the wastes). Since it is made out of fish and fish extracts, it is a by-product of fish. The hard-working fishermen bring the quantity of fish to home. The womenfolk of the country themselves become busy with cooking fish and then serving their husbands who bears the title of ‘kings of the Ocean’ with good food.

Usually the flesh of fish is cooked in big dish for a continuous fifteen minutes. When it is cooking, the water evaporates and then scum is produced on the surface once it get concentrated. The same process is repeated until the whole stock has been cooked. Fish extracts like head, bone etc are used for making Rihaakuru. The scum (filleyo) is carefully removed to bring taste.

The thick soup we get after boiling the fish for several hours together is called rihaakuru. This final output which we call Rihakuru, is in red-brown colour with sour taste. Mostly firewood is used for cooking, however, in modern times, boilers, gas and electric modes are used for easiness and to save time.

Rihaakuru is a base for curries and other soups. We use rihaakuru with rice, roti and other foods. It is also used in Chinese dishes including Cha Kuay Teow Meu, Fried Vegetables (Kai Lan Chya Sim, Pak Choy) and Muay.

There is also a special type of rihaakuru called theluli rihaakuru. It is made out of fried onion, curry leaves, chilies, bon’di (fish balls) mixing with rihaakuru. Bon’di is a fish ball made out of fish extracts of the bones.

For every 100g of rihaakuru, it contains 250 calories of energy, 58% protein, 1.4% fat and 1.1% carbohydrates. MIFCO (Maldivian Industry of Fisheries Company) is a home-based company which produces rihaakuru in good hygienic condition and exports to other parts of the world in European Union standard. No doubt, this is a delicious traditional food of the Maldives.