Why is possibility production curve concave

CBSE has released the term-1 admit card SBI PO prelims admit card released. Share This Video. Apne doubts clear karein ab Whatsapp par bhi. Try it now. Ab clear karein apne doubts Whatsapp par bhi. Continue with Google. Continue with Facebook. Forgot Password? New User? Sign Up. Create your account now. Signup with Email. Gender Male Female. Likewise, it moves on to Point D by sacrificing 9 units of consumer goods to produce one more unit of capital good.

Hence, PPC has a concave shape. Question Papers. Question Papers Textbook Solutions MCQ Online Tests In the context of a PPF, opportunity cost is directly related to the shape of the curve see below. If the shape of the PPF curve is a straight-line, the opportunity cost is constant as production of different goods is changing.

PPC is concave shaped because of increasing marginal rate of transformation. It implies that more and more units of commodity sacrificed to gain an additional unit of another commodity. PPC is convex shaped because of decreasing marginal rate of transformation. Since resources are use specific, therefore every time when one more unit of a product X is produced more units of product Y are sacrificed that results in increasing marginal opportunity cost which leads to the concave shape of the PPC.

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. In other words, production possibility curve can be defined as a graph that represents different combinations of quantities of two goods that can be produced by an economy under the condition of limited available resources.

In business, the Production Possibility Curve PPC is applied to evaluate the performance of a manufacturing system when two commodities are manufactured together. When a firm diverts its resources to produce commodity B, the production of commodity A will reduce. There are 3 types of production possibility curve which are straight-line sloping down, concave and convex curve.

Because the production possibilities curve for Plant 1 is linear, we can compute the slope between any two points on the curve and get the same result.