Question

Explain why a production possibility curve is concave to the point of the origin

Answer 1

Answer:

PPC is concave to the origin because of Marginal Opportunity Cost. In order to increase the production of one good by one unit or more units of other good have to be sacrificed since resources are limited and are equally efficient in production of the goods.

Step-by-step explanation:

A PPC curve generally refers to the representation of amount of two different goods that can be obtained by foregoing an estimate of a certain unit required in terms of another. As the amount of one good increases by foregoing the required proportion of other,the opportunity cost of the foregone good increases. This increase in the opportunity cost causes the curve shape concave to the origin. (Maximum utilisation of resources)

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 can prove realistic practically. For example, when you are about to produce 10000 units of food against an estimation of 5000 units of cloth. But unfortunately you have only 4000 units of cloth to forgo,so you will either forgo less units of cloth or forgo it proportionately. Further even when the opportunity cost is zero, you will continue to produce more units of food maybe by the introduction of another commodity. This will lead the Production Possibility Curve to be convex to origin.

Answer 2

A PPC is concave to the origin because of the increasing Marginal opportunity cost. The opportunity cost of producing the goods increase when more of the same product is produced.

• The production possibilities curve, is the curve that shows the maximum number of possible units which a company can produce if it produces only two products efficiently using all of its resources.
• A PPC is concave to the origin, as it is necessary to sacrifice each additional unit of good X more and more unit of good Y. The opportunity costs of producing each additional unit of good X will tend to rise as per the loss of the production of good Y.