Quick Answer: Why Is PPC Concave Explain?

What does concavity of PPC indicate?

The shape of a production possibility curve (PPC) reveals important information about the opportunity cost involved in producing two goods.

When the PPC is concave (bowed out), opportunity costs increase as you move along the curve.

When the PPC is convex (bowed in), opportunity costs are decreasing..

Why is PPC Convex to origin?

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. … Capital resources, can be assumed to be equally able to produce food or housing.

What is the shape of production possibility curve?

A production possibilities frontier defines the set of choices society faces for the combinations of goods and services it can produce given the resources available. The shape of the PPF is typically curved outward, rather than straight.

Can cavity of PPC implies?

Since resources are use specific, therefore each time an additional unit of a commodity is produced larger quantity of the other commodity is sacrificed. This results in increasing marginal opportunity cost which leads to the concave shape of PPC owing to increasing slopes.

What does a point below PPC indicate?

A point below PPC like F, depicts inefficiency or underutilisation of available resources . …

How do you explain the production possibility curve?

The production possibilities curve (PPC) is a graph that shows all of the different combinations of output that can be produced given current resources and technology. Sometimes called the production possibilities frontier (PPF), the PPC illustrates scarcity and tradeoffs.

Why is PPC downward sloping?

A production possibilities curve shows the combinations of two goods an economy is capable of producing. The downward slope of the production possibilities curve is an implication of scarcity. The bowed-out shape of the production possibilities curve results from allocating resources based on comparative advantage.

Why is PPC concave 11?

PPC is concave to the origin because of increasing Marginal opportunity cost. This is because inorder to increase the production of one good by 1 unit more and more units of the other good have to be sacriced since the resources are limited and are not equally efficient in the production of both the goods.

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.

Can PPF be convex?

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. In such case, PPF will be a convex shaped curve as shown in Fig. … So, PPF is always concave shaped.

What are the properties of PPC?

The two main characteristics of PPC are:Slopes downwards to the right: PPC slopes downwards from left to right. … Concave to the point of origin: It is because to produce each additional unit of commodity A, more and more units of commodity B will have to be sacrificed.

In which situation 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.

How does shift in PPC curve takes place?

Lesson Summary Shifts in the production possibilities curve are caused by things that change the output of an economy, including advances in technology, changes in resources, more education or training (that’s what we call human capital) and changes in the labor force.