The production possibilities curve is bowed in shape due to the fact that of the law of increasing opportunity cost, which defines the idea the the much more units that a product are produced, the less ability the economic climate has of creating other products.
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The production Possibilities Curve represents the selection society faces about whether to invest resources (inputs) into creating one kind of product or organization or another. The factor that this curve is bow-shaped is a direct result of the legislation of raising opportunity cost. This legislation states that any time society...
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The manufacturing Possibilities Curve to represent the choice society faces about whether come invest sources (inputs) into developing one type of product or service or another. The reason that this curve is bow-shaped is a direct result of the regulation of increasing opportunity cost. This law states that any kind of time culture decides to relocate along its manufacturing possibilities curve to create a particular kind of an excellent or service, the opportunity price of making additional units of that great or company will increase. The reason for this boost in opportunity cost is that, once a particular amount of society or financial resources are offered to produce a specific kind that product, they alleviate the complete amount the resources accessible to make everything else. The more resources the are used (corresponding come a greater number of systems of the finished product), the less capable the economic situation is of maintain other creates of production. At a specific point, it is no longer economically viable to proceed to create increasing number of a one particular great or service. The hinderance it reasons to the production of other things (the possibility cost) is as well great.
In modelling the production possibilities curve, we assume that the economic situation can develop two (or more) goods and also that the an innovation and components of production remain unchanged and also equivalent because that both. In general, the curve does not tell financial experts where a an especially production process will operate most effectively (on the curve itself). Rather, the tells us what possibilities exist within a provided economy.
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I am going to replicate here an example detailed in Timothy Tregarthen and Libby Rittenberg’s textbook, Economics, 2nd Edition, to show this suggest (pgs. 45-46). Speak we produce a production possibilities curve to chart the manufacturing of weapons vs the manufacturing of butter. The former is an example of a defense industry good, whereas the latter a civilian good. Speak that guns are the y-axis, butter the x-axis, and that the curve bows outside as we relocate from left come right. As we move from left to best on the x-axis, we produce less firearms and an ext butter. If us were come take any kind of two clues on the curve, say suggest A and B, v A being additional to the left ~ above the x-axis, the opportunity expense of creating less weapons for much more butter would be the number of guns at allude A minus the variety of guns at suggest B. Number 2-6 in the textbook the I have linked below illustrates this case well. The production possibilities curve is bow-shaped precisely because there will a vital point at which the produciton of less guns method the opportunity for more butter, and vice versa. This function cannot be represented via a linear model.
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