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| 1. |
What is the implication of concavity of PPC?Explain with suitable example. |
| Answer» Production Possibility Curve\xa0(PPC) is\xa0concave\xa0to the origin because of the increasing opportunity cost. As we move down along the\xa0PPC, to produce each additional unit of one\xa0good, more and more units of other\xa0good\xa0need to be sacrificed. That is, as we move down along the\xa0PPC, the opportunity cost increases.\xa0The\xa0curve\xa0measures the trade-off between producing one good versus another. For\xa0example, say an economy can\xa0produce\xa020,000 oranges and 120,000 apples. On the chart, that\'s point B. If it wants to\xa0produce\xa0more oranges, it must\xa0produce\xa0fewer apples. | |