Why ppf is downward sloping

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utilisation of the given resources, in order to produce an additional unit of one good, some of the resources are to be withdrawn from the production of another good. This implies that for producing an extra unit of one good more and more units of other good are to be sacrificed. In the above figure, consider the movement from point A to B. In order to produce one extra unit of Good X , 4 units of Good Y are to be sacrificed.

Similarly, the movement from point D to E, 8 units of Good Y is to be sacrificed in order to produce an extra unit of Good X. This indicates the rising opportunity cost of producing Good X. 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.

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. 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.

The two basic property of production possibility curve are: It slopes downward from left to right- Production possibility curve slopes downward because both the variables involve in the equation are inversely related as one increase then other one decreases and vice versa because the resources are constant.

It is because in a situation of fuller utilisation of the given resources, production of both the goods cannot be increased simultaneously. Producing more snowboards requires shifting resources out of ski production and thus producing fewer skis. 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utilisation of the given resources, in order to produce an additional unit of one good, some of the resources are to be withdrawn from the production of another good.

When the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve. 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. A point below PPC like F, depicts inefficiency or underutilisation of available resources. In other words, we can say that points that lie below the PPC such as point F are associated with underemployment of resources and inefficient utilisation of the available technology.

That is the Law of Increasing Opportunity Cost. Because the production possibilities curve for Plant 1 is linear, we can compute the slope between any two points on the curve and get the same result.

The bowed-out production possibilities curve for Alpine Sports illustrates the law of increasing opportunity cost. Scarcity implies that a production possibilities curve is downward sloping; the law of increasing opportunity cost implies that it will be bowed out, or concave, in shape. This website uses cookies to improve your experience.

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I consent to the use of following cookies:. Likewise, the opportunity cost of creating more web pages means that fewer meals can be produced. The production possibilities frontier shifts over time. If an economy accumulates more physical capital or has a larger workforce, then it will be able to produce more of all the goods in an economy.

Further, it will be able to produce new goods. Another factor shifting the production possibilities frontier outward over time is technology.