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The convexity of an indifference curve results from the fact that the absolute value of its (negative) derivative, which is the marginal rate of substitution is decreasing. But why do we say that it's convex to the origin? What is an implicit function that is convex and concave to the origin?
The shape of a PPF is commonly drawn as concave to the origin to represent increasing opportunity cost with increased output of a good. Thus, MRT increases in absolute size as one moves from the top left of the PPF to the bottom right of the PPF.
The PPC stands concave to its point of origin on the graph which is a result of the increasing marginal rate of transformation. The shape of the PPC will also depend on whether there are increasing, decreasing, or constant costs of production. (Related Blog: An Introduction to Capital Budgeting)
21 Μαρ 2024 · The production possibilities curve (PPC) is a graph that shows all combinations of two goods or categories of goods an economy can produce with fixed resources. Take the example illustrated in the chart.
2. Concave to the Origin: Production possibility curve is concave to the origin. It shows the operation of the law of increasing opportunity cost. In figure when we move from A to B, economy has to forgo one million quintals of wheat.
14 Αυγ 2024 · What Is an Isoquant Curve? An isoquant curve is a line on a graph that charts all the combinations of inputs that produce a specified level of output. Such a graph is used to illustrate the...
3 Οκτ 2024 · Efficiency: Any point on the curve represents an efficient use of resources, while any point inside the curve represents inefficiency (underutilization of resources). A point outside the curve is unattainable with current resources and technology. The PPC is typically concave to the origin.
