What is the shape of a PP curve?
Answer:The PPC is usually a concave curve that starts at one axis and ends at the other, as illustrated. We will call this curve AD, using the letters at each end of the curve. Point A intersects the Y-axis, and Point D intersects the X-axis. Each axis measures the quantity of a specific item produced.
What is the production possibility curve explain?
In business analysis, the production possibility frontier (PPF) is a curve that illustrates the variations in the amounts that can be produced of two products if both depend upon the same finite resource for their manufacture. The PPF is also referred to as the production possibility curve or the transformation curve.
Why is a PPF curved?
The first is the fact that the budget constraint is a straight line. This is because its slope is given by the relative prices of the two goods. In contrast, the PPF has a curved shape because of the law of the diminishing returns.
What is PP curve Why does it slope downwards?
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. Such an allocation implies that the law of increasing opportunity cost will hold.
Why is PPC concave?
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. This confirms the concave shape of PPC.
Why is PPC bowed outward?
The Production Possibilities Curve (PPC) is a model that captures scarcity and the opportunity costs of choices when faced with the possibility of producing two goods or services. The bowed out shape of the PPC in Figure 1 indicates that there are increasing opportunity costs of production.
What is PPC curve explain with diagram?
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 the PPF curved and not straight?
Its always drawn as a curve and not a straight line because there a cost involved in making a choice i.e when the quantity of one good produced is higher and the quantity of the other is low. This is known as opportunity cost.
What is the 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.
Why is PPC downward sloping 11?
The downward sloping nature of the PPC is due to the law of increasing opportunity cost. According to this law, with the fuller utilisation of the given resources, in order to produce an additional unit of one good, some of the resources are to be withdrawn from the production of another good.
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 a PPC be upward sloping?
1 Expert Answer No, When you exand production of one good you must reduce production of some other good in order to produce it.
How is the PPC related to the production possibilities curve?
Points on the interior of the PPC are inefficient, points on the PPC are efficient, and points beyond the PPC are unattainable. The opportunity cost of moving from one efficient combination of production to another efficient combination of production is how much of one good is given up in order to get more of the other good.
Why is the PPC a concave shaped curve?
It is downward sloping because few units we sacrifice for another. As there exists an inverse relationship between change in the quantity of one commodity and change in the quantity of then other commodities PPC is concave shaped because more and more units of one commodity are sacrificed to gain an additional unit of another commodity.
What does a point above the curve mean?
A point above the curve indicates the unattainable with the available resources. A point below the curve means that the production is not utilising 100 percent of the business’ resources. Related link: What is Demand? The production of 20,000 watermelons and 1,20,000 pineapples is shown on point B in the graph.
Why are production points inside the curve not possible?
Production points inside the curve show an economy is not producing at its comparative advantage. Conversely, production outside the curve is not possible as more of both goods cannot be produced given the fixed resources.