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PPFs are normally drawn as bulging upwards or outwards from the origin ("concave" when viewed from the origin), but they can be represented as bulging downward (inwards) or linear (straight), depending on a number of assumptions.
The curve is the frontier line beyond which existing resources cannot cross. If the society is able to increase the resources due to the process of growth, new curve GH is formed. The rightward shifting of the curve (new curve) shows the growth of resources. PPC is concave to the origin.
Production possibility curve (PPC) is concave to the origin because marginal opportunity cost (Loss of output of Y Gain of output of X) of shifting resources from commodity Y to commodity X tends to rise. This happens because resources are use-specific.
The most important difference between the two graphs, though, is that a budget constraint is a straight line, while a production possibilities curve is typically bowed outwards, i.e. concave towards the origin. The reason for this difference is pretty simple: the slope of a budget line is defined as the ratio of the prices of the two goods or ...
In the graph, the line sloping down also depicts the trade-off between producing commodity A and commodity B. When a firm diverts its resources to produce commodity B, the production of commodity A reduces.
22 Ιουλ 2022 · The shape of PPC and its slope (MRT) shows the existence of economies of scope. The PPC is concave to the origin and the MRT increases as we move along the PPC. The joint production of products X and Y has some cost benefits.
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.
