Skip to main content

Why is the PPC Downward Sloping?

 If we look at the PPC, we observe two things with respect to its shape. Firstly, it is downward sloping and secondly, it is concave to origin.

PPC is a Downward Sloping Curve 

A downward sloping curve means that when the production of one good is increased, the production of the other has to be decreased in order to be on the same curve. This means the increase in one good is not possible without decrease in the other good. 

If we look at the PPC, we find that in order to increase the production of rice, the production of wheat has to be decreased. This is because the resources are being already fully utilized, so in order to increase the production of rice, more resources which are needed for rice’s production will come when some resources are taken out of the production of wheat.

Slope of PPC
In the diagram, when we move from a point B to C on the PPC, there is an increase in production of Rice and a decrease in the production of wheat. Hence, when the production of rice increases, that of wheat decreases as some resources are taken out of the production of wheat and used for the production of rice. This makes the PPC curve downward sloping or having a negative slope.

Slope of the PPC

The slope of the PPC is the ratio of change in the production of one good to the change in the production of the other when there is a movement along the PPC from one point on the curve to another point. 

More specifically, when we move from a point B to C on the PPC, some resources are removed from the production of wheat and put to use for the production of rice, leading to fall in the production of wheat and rise in the production of rice. 

Thus, slope of PPC is measured by the loss of production of wheat divided by the gain in the production of rice when we move from a point B to C on the PPC. When, we move from a point B to C, the production of rice increases by 1 unit and that of wheat decreases by 2 unit, the slope can be written as

Slope of PPC =  Change in Wheat/Change in Rice

Or Slope of PPC=  Loss in the production of Wheat /Gain in the Production of Rice

                                    = -2/1 = -2

Key Points

  • As the resources are being fully utilized, so in order to increase the production of one good, the production of the other good has to be deceased leading to a downward sloping PPC. 
  • The slope of the PPC is the ratio of change in the production of one good to the change in the production of the other when there is a movement along the PPC from one point on the curve to another point.
Labels:

Popular Posts

Understanding Trade-Offs in Economics: Balancing Choices for Optimal Outcomes

  TRADE-OFFS  Economics is concerned with people making decisions. However, these decisions are not always easy to make as making a decision involves making a choice. This choice may be between different alternatives/goals/options. Generally, choosing one goal means not being able to choose the other one. This results in what we call a trade-off where in order to choose one thing we have to let go or sacrifice the other one. Examples of Trade-Offs:  P eople face numerous trade-offs in their daily lives. Let’s say a person wants to reach his office. He may either go by car or bicycle. Going by a bicycle is not only environmentally friendly but also is a good exercise. However, going by a car will save time and make him reach faster. This is a situation of trade-off where the person has to choose an option and in choosing one, he will be giving up the other one. A family which has a limited monthly budget has to decide whether to spend that money on a vacation, saving for their chil
Read more

Measures of Central Tendency

Let’s say I walk into a class of fifth graders, and start asking them their ages one by one and note them down. There are 20 students in the class and this is what my list looks like Roll. No.               Age 1.                           10 2.                           10 3.                           10 4.                            9 5.                           10 6.                            10 7.                            9 8.                            11 9.                            10 10.                          10 11.                          12 12.                          10 13.                           9 14.                          10 15.                          10 16.                          11 17.                          10 18.                           10 19.                            9 20.                           10 As I look at their ages, do I see something common or worth noting. More specifically do I find a n
Read more

Consumer's Equilibrium using Marginal Utility Analysis

The Law of Diminishing Marginal Utility It has been observed that the desire to consume a commodity decreases as more and more units of that commodity are consumed. Therefore, every successive unit of the commodity consumed provides lesser utility than before. The Law of Diminishing Marginal Utility states that as more and more units of a commodity are consumed, the Marginal Utility derived from every successive unit of the commodity declines.  This happens because psychologically, as a consumer starts to consume one unit of the good after another, the the consumers satisfaction reaches a saturation point. So, with every successive unit consumed, the additional utility the consumer derives goes on declining.  Consumer's Equilibrium using Marginal Utility: Cardinal Analysis Consumer's equilibrium is that level of consumption at which the consumer is getting maximum satisfaction (benefit) while spending out of his given income across different goods and services, and has no tende
Read more