DIFFERENT SHAPES OF PRODUCTION POSSIBILITY CURVE


 Learning Contents:                                                            

·         Understanding the Concave shape of PPC

·         Understanding the Linear  shape of PPC

·         Understanding  the Convex  shape of PPC

Concave Shape: The concave shape of the production possibility curve occurs due to increasing marginal opportunity cost. It means that in order to produce more units of good X, more and more units of Good Y is to be sacrificed. This is because of the application of the law of diminishing returns.

Below mentioned table 5 and diagram 5 would reveal why the shape of PPC is convex to the point of origin as we can see that to produce more units of clothes, more and more units of the production of shoes are to be sacrificed which is indicated by increasing or rising opportunity cost.

Table 5: Production Possibility Schedule

Clothes

0

1

2

3

4

5

Shoes

30

28

24

18

10

0

Rising MOC

----

2/1=2

4/1=4

6/1=8

8/1=8

10/1=10  





                                The above data are illustrated graphically in Diagram 5

Linear Shape: The linear shape of the Production possibility curve occurs when the marginal opportunity cost is constant which means in order to produce more units of good x, same units of good y are to be sacrificed or when the ratio of loss of output of one good is equal to gain of output of other good. It is because of the application of the law of constant returns to factor. Below mentioned table 6 and diagram 6 would reveal why the shape of PPC is a straight line as we can see that to produce one more unit of clothes, 8 units of shoes are to be sacrificed every time which indicates constant opportunity cost. Factors of production are equally effective in the production of both the goods.

Table 6: Production Possibility Schedule

Clothes

0

1

2

3

4

5

Shoes

40

32

24

16

08

00

Constant MOC

----

8/1=8

8/1=8

8/1=8

8/1=8

8/1=8


                                The above data are illustrated graphically through Diagram 6

Convex Shape: The convex shape of the production possibility curve occurs due to decreasing marginal opportunity cost. It means that in order to produce more units of good X, less units of Good Y are sacrificed. This is because of the application of the law of increasing returns. Below mentioned Table 7 and Diagram 7 would reveal why the shape of PPC is convex to the point of origin as we can see that fewer and fewer units of shoes are sacrificed to gain an additional unit of clothes indicated by diminishing opportunity cost.

Table 7: Production Possibility Schedule


Clothes

0

1

2

3

4

5

6

Shoes

22

16

11

7

4

2

1

Diminishing

   MOC

----

6/1=6

5/1=5

4/1=4

3/1=3

2/1=2

1/1=1

                                    Diagram 7

                        The above data is illustrated through diagram 7

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