Question
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 |
Solution
Production Possibility Curve (PPC) will be concave to the origin because of the increasing
opportunity cost. As we move down along the PPC, to produce each additional unit of Good
X, more and more units of Good Y needs to be sacrificed. That is, as we move down along
the PPC, the opportunity cost increases. And this causes the concave shape of PPC.
