Question

Explain the difference be tween consumption possibilities and production possibilities. How it is possible for a country to consume a greater quantity of goods and services than it is actually capable of producing?

Answer 1

Ans:- Production possibilities is the capacity of an economy or a nation to produce or manufacture goods or services in a particular income or skills.If a nations income and technologies are in good condition it is possible to increase production of goods.

Consumption possibilities is an arrangements of goods in which a country or an economy can consume.The consumption possibilities are based on two ways. They are possible production of goods in a country or an economy and the other is trade with other nation.These are based on a countries income.

It is possible for a country to consume a greater quantity of goods and services than it is actually capable of producing through trade relation with other country.Trade can make two countries better relation.If one country does not have sufficient product/goods then that good can import from other country,it depends with country's income.For example ,if India doesn't have sufficient wheat cultivation then it can import from other nation ,and the people of India can consume a greater quantity of wheat.