Relationship between Production Possibility Curve and the Opportunity Cost

Relationship between Production Possibility Curve and the Opportunity Cost

As discussed, opportunity cost means the satisfaction of ones’ want at the expense of another want. It simply refers to a forgone or sacrificed alternative.

Production possibility curve on the other hand involves opportunity cost. The Production Possibility Curve (PPC) involves sacrifice in the production of one commodity in order that another commodity can be produced.

Therefore, the opportune/ cost of producing one commodity is the resources that are sacrificed in order to produce another commodity. The sloping down of the PPC indicates the opportunity cost of production of another commodity. For instance if some quantities of beans are forgone in order to produce some quantities of rice,Β  causing a movement of the PPC curve from let’s say point A to point B, this means that sacrifice has been made.

This shows that production possibility curve and opportunity cost are closely related in solving economic problems of maximising the satisfaction of human wants with the limited available resources.

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Somtochukwu

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