One curve: A curve showing all possible combinations that can be produced given the current stock of capital, labor, natural resources, and technology. A straight line represents constant opportunity costs, and a bowed out line represents increasing opportunity costs.

What is a bowed out shape?

The shape of a production possibility curve (PPC) reveals important information about the opportunity cost involved in producing two goods. When the PPC is concave (bowed out), opportunity costs increase as you move along the curve. When the PPC is convex (bowed in), opportunity costs are decreasing.

Why PPF has a bowed shape?

The production possibilities curve is bowed in shape because of the law of increasing opportunity cost, which explains the idea that the more units of a product are produced, the less capability the economy has of producing other products.

What does a PPC curve show?

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 PPC not a straight line?

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. The production possibilities frontier (PPF) is curved because the cost of production is not constant.

Why is 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. The PPF is called a frontier or a boundary line because any point on the curve represents full employment of resources.

What is the shape of PPC?

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.

What are two shifters of a PPC?

Shifts in the production possibilities curve are caused by things that change the output of an economy, including advances in technology, changes in resources, more education or training (that’s what we call human capital) and changes in the labor force.

Why would opportunity cost increase?

The law of increasing opportunity cost is the concept that as you continue to increase production of one good, the opportunity cost of producing that next unit increases. This comes about as you reallocate resources to produce one good that was better suited to produce the original good.