Question

If the same number of units of good Y must be given up as each successive unit of good X is produced, then the PPF for these two goods is_________________.

Answer 1

Answer:

PPF : Downward Sloping Straight Line

Explanation:

PPF is the locus of product combinations that an economy can produce, given resources & technology.

It is downward sloping : Because of inverse relationship between two goods- if one has to be increased other has to be decreased , because of same resources & technology.

Marginal Opportunity Cost (Slope of PPC): is ratio of a good sacrifised to gain each additional unit of the other good.

∆ Good sacrifised / ∆ Good gained

If this ratio is same i.e constant amount of a good is sacrifised to gain an additional amount of the other one , the slope of PPC is constant & it is a straight line

Eg : Good1    Good2     MOC [∆Good2/∆Good1]

      0               20             _        

      10             10           -10/10 = -1                  (10-20)/(10-0)

       20              0           -10/10 = -1                   (0-10)(/20-10)

So , same (1) good 2 is sacrifised to attain a good 1 each time.

However Generally: MOC is increasing , because of assumption that resources are unequally efficient in various goods production - shifting good from efficient to inefficient increases sacrifise each time. This makes PPC usually concave.