Increasing Opportunity Cost Flashcards
1
Q
Why is the PPE curved and concave origin?
A
It is an assumption that there is perfect mobility between the production of two resources in an economy. As we specialise into products, the opportunity costs of producing the product increase, because we are using more and more resources that are poorly suited to produce it (for example labourers who are less efficient into producing something).
2
Q
What is the law of increasing opportunity cost?
A
The law of increasing opportunity cost holds that as an economy moves along its production possibilites curve in the direction of producing more of a particular good, the opportunity cost of the additional units of that good will increase, resulting in the curvature.
