CAPF AC 2021 Q31: Indian Economy – Microeconomics & Market Concepts
- (a) The production possibility frontier slopes downwards to the right as the resources are limited.
- (b) The different combinations of various goods and services given the available resources and technology are denoted by the production possibility frontier.
- (c) Any point on or inside the production possibility frontier is attainable under the existing technology and resources.
- (d) On the production possibility frontier, the output of one commodity can be increased without changing the output of another commodity.
Answer: (d) On the production possibility frontier, the output of one commodity can be increased without changing the output of another commodity.
Explanation
Production possibility frontier (PPF)
How to think: the PPF shows the maximum combinations of two goods an economy can make with its fixed resources and technology.
On the curve, every resource is already in use.
So to make more of one good, you must give up some of the other.
| Position | Meaning |
|---|---|
| On the PPF | Attainable, resources fully and efficiently used |
| Inside the PPF | Attainable, but resources are idle or wasted |
| Outside the PPF | Not attainable with present resources |
Why the curve slopes down: resources are limited, so more of one good means less of the other.
The amount given up is the opportunity cost.
So statement (d) is wrong: on the frontier, one output can rise only if the other falls.
Raising one without changing the other is possible only from a point inside the curve.
Answer: (d).
Why each option is right or wrong
- (a) Incorrect. This is true: the PPF slopes downwards because resources are limited.
- (b) Incorrect. This is true: the PPF shows the combinations possible with given resources and technology.
- (c) Incorrect. This is true: points on or inside the PPF are attainable.
- (d) CORRECT. This is wrong: on the PPF, more of one good needs less of the other.
Key point
PPF: downward sloping and concave to the origin. On the curve = full use of resources; inside = underuse; outside = unattainable. Moving along the curve involves an opportunity cost.
Remember
On the PPF, more of one means less of the other.
Common mistakes
- Missing the word not and marking a statement that is actually true.
- Thinking points inside the frontier cannot be produced by the economy.
- Forgetting that opportunity cost is the whole lesson of the PPF.
Exam tip
Educated guess: statement (a) says the curve slopes down, which means a trade-off. Statement (d) says there is no trade-off. They cannot both be true, and (a) is the textbook line.
Sources
- NCERT Class XI Economics — Introductory Microeconomics, Chapter 1 (production possibility frontier)
- NCERT Class XII Economics — Introductory Microeconomics (central problems of an economy)