Why Production Possibilities Curve(PPC) is concave? Explain.
1 Answer
- PPC is concave because of increasing marginal opportunity cost (MOC).
- This behavior of the MOC is based on the assumption that all resources are not equally efficient in the production of all goods.
- The rise in opportunity cost occurs when factors (resources) which are specialized or more adopted for the production of a piece of particular good (say, tanks), is transferred to the production of another good (say, wheat) for which they are less productive or less specialized.
- Thus, the transfer of resources from more productive to less productive uses indirectly means fall in their productivity, with the result more of such resources, are needed to produce an additional unit of the other commodity. Thus marginal opportunity cost goes on increasing making the PP curve concave in shape.
-
Write the meaning of various concepts of cost. Explain them. 1
-
Explain the meaning and nature of total variable cost along with diagram 1
-
Explain the meaning and nature of total cost along with diagram 1
-
Differences between total fixed cost and total variable cost 1
-
Differences between a Movement along and Shift in the Demand curve. 1
-
Differences between Movement along a supply curve and shift in the supply curve 1