The collection of all possible combinations of goods and services that can be produced from a given amount of resources and a given stock of technological knowledge is called?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Production Possibility Set
An economy has only so much land, labour, capital and know-how. With a given amount of resources and a given stock of technological knowledge it can make more of one good only by making less of another, and each way of sharing out the resources gives a different combination of goods and services. All these possible combinations taken together form the production possibility set of the economy.
Its outer edge, the production possibility frontier, shows the largest amount of one good that can be produced for each amount of the other.
Why the other options are incorrect
Option (1) Indifference Curve — Incorrect. An indifference curve joins the bundles of two goods that give a consumer the same satisfaction, so it describes the consumer’s preferences, not what the economy can produce.
Option (3) Isoquant Curve — Incorrect. An isoquant shows the combinations of two inputs that give one firm the same level of output, so it belongs to a single firm’s production function, not to the whole economy’s output of goods.
Option (4) Budget Line — Incorrect. The budget line shows the bundles a consumer can just buy with a given income at given prices, so it is limited by the consumer’s money income, not by the economy’s resources and technology.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 13-05 S1 24-05 S1* | 13-05 S1* 30-05 S2* | – | – | – |
* A similar question.
NCERT (2025-26): “1.2 Central Problems of an Economy … The scarce resources have alternative usages and every society has to decide on how much of each of the resources to use in the production of different goods and services. In other words, every society has to determine how to allocate its scarce resources to different goods and services. An allocation of the scarce resource of the economy gives rise to a particular combination of different goods and services. Given the total amount of resources, it is possible to allocate the resources in many different ways and, thereby achieving different mixes of all possible goods and services. The collection of all possible combinations of the goods and services that can be produced from a given amount of resources and a given stock of technological knowledge is called the production possibility set of the economy.” |