Production Possibility Curve (PPC) is concave to the origin because of the increasing opportunity cost . As we move down along the PPC, to produce each additional unit of one good, more and more units of other good need to be sacrificed. ... And this causes the concave shape of PPC.
Why the production possibility curve is concave?
The production possibility curve is concave to the point of origin because to produce each additional unit of Good X, more units of Good Y will have to be sacrificed than before . The opportunity cost of producing every additional unit of Good X tends to increase in terms of the loss of production of Good Y.
Is production possibility curve convex or concave?
The production possibility curve is convex outward from the origin because some of the economy’s resources are better able to produce good X than good Y while other resources in the economy are better able to produce good Y than good X.
Why is PPC concave 11?
Production Possibility Curve (PPC) is concave to the origin because of the increasing opportunity cost . As we move down along the PPC, to produce each additional unit of one good, more and more units of other good need to be sacrificed. ... And this causes the concave shape of PPC.
What is concave curve?
Concave describes an inward curve ; its opposite, convex, describes a curve that bulges outward. They are used to describe gentle, subtle curves, like the kinds found in mirrors or lenses. ... If you want to describe a bowl, you might say there is a large blue spot on the center of the concave side.
Can PPC be convex to Origin?
Answer: Therefore the PPC curve can be convex to the origin when the opportunity cost decreases . This can happen only when less and less units are forgone of first commodity for the introduction of additional unit of another commodity. ... This will lead the Production Possibility Curve to be convex to origin.
What is slope of PPC?
Slope of PPC shows the ratio between the loss of output and gain of output . ... The slope of production possibility curve is the marginal opportunity cost which refers to the additional sacrifice that an economy makes when it shifts resources and technology from production of one commodity to the other.
Why is PPC called opportunity cost?
Production Possibility Curve is called the opportunity cost curve as it is the curve which shows the combinations of two goods and services that can be produced with fuller utilisation of a given amount of resources in the most efficient way and with a given production technology. ... PPC is concave to origin.
Is equal to slope of PPC?
The slope of any PPC equals the marginal cost of producing x , so if the slopes of the two PPC’s are equal, then A’s marginal cost of producing x is equal to B’s marginal cost, and production is efficient.
What is the shape of PPC curve?
The shape of a production possibility curve (PPC) reveals important information about the opportunity cost involved in producing two goods. When the PPC is a straight line , opportunity costs are the same no matter how far you move along the curve.
What is the shape of PPF curve?
The shape of a PPF is commonly drawn as concave to the origin to represent increasing opportunity cost with increased output of a good.
What does a concave curve look like?
Concave describes shapes that curve inward, like an hourglass . Convex describes shapes that curve outward, like a football (or a rugby ball).
What is concave down?
A function is concave down if its graph lies below its tangent lines . If knowing where a graph is concave up/down is important, it makes sense that the places where the graph changes from one to the other is also important. This leads us to a definition. Definition: Point of Inflection.
How do you tell if a graph is concave or convex?
To find out if it is concave or convex, look at the second derivative . If the result is positive, it is convex. If it is negative, then it is concave. To find the second derivative, we repeat the process using as our expression.
Can the PPF be convex?
Can PPF be Convex to the Origin? PPF can be convex to the origin if MRT is decreasing, i.e. less and less units of a commodity are sacrificed to gain an additional unit of another commodity. ... So, PPF is always concave shaped .
Why PPC is a straight line?
A PPC curve can be a straight line only if the marginal rate of transformation (MRT) is constant throughout the curve . A MRT can remain constant only if both the commodities are equally constant and the marginal utility derived from their production is also constant.
