16th October 2019


Why the production possibilities curve is bowed out in shape?

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.

Similarly one may ask, why do opportunity costs increase as you make more and more butter and fewer guns?

As you make more and more butter and fewer guns, opportunity costs increase because as production switches from guns to butter, increasing amounts of resources are needed to increase the production of butter.

Why is the shape of the economy's production possibility curve concave?

It is because resources like labor or capital must be relocated to produce weapons. Most of the PPF curves are concave due to the inadaptability of the resources. The law of increasing opportunity cost states: as the production of one good rises, the opportunity cost of producing that good increases.

What is the principle of increasing opportunity cost?

In economics, the law of increasing costs is a principle that states that once all factors of production (land, labor, capital) are at maximum output and efficiency, producing more will cost more than average. As production increases, the opportunity cost does as well.
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