Giving reason comment on the shape of Production Possibilities Curve based on the following schedule: | |
Good X (units) | Good Y (units) |
0 | 10 |
1 | 9 |
2 | 7 |
3 | 4 |
4 | 0 |
Answer:
The PPC would be concave in shape. This is because of the increasing opportunity cost. ?With increase each additional unit of production of good X of the amount of good Y that must be sacrificed increases. For example, as the production of good X moves from first unit to second unit, 2 units of good Y must be sacrificed (9 - 7). Further, as the production moves from second unit to third unit, the units of good Y that must be sacrificed increases to three. Thus, the opportunity cost of producing one additional unit of good X goes on increasing. This increasing opportunity cost gives rise to concave shape of PPC.
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