<p>It is apparent that the farther a combination is away from the origin, the more quantities are being produced in an aggregate sense.</p>
<p>When there is decreasing opportunity costs, it is cheaper to produce high amount of one commodity rather than produce both commodities, which is why the PPF is bowed in, and looks <em>kind of</em> asymtotic in both axes.</p>
<p>When there is increasing opportunity cost, it is cheaper to produce average amounts of both commodities rather than specialising in one (i.e., large amounts of one while little of the other), which is why the PPF is bowed out, i.e., combinations in <em>sort of a 45 degree angle</em> (where both commodities are being produced and neither is too favoured over the other) is farther from the origin.</p>
<p>Therefore, in the former case, the intercepts (the specialising region) is farther away from the origin than the <em>45 degree</em> part (non specialising region), while the reverse is true for latter.</p>
<p>You could use calculus to understand it formally. If there are two commodities <span class="math-container">$A$</span> and <span class="math-container">$B$</span>, the PPF is <span class="math-container">$A=F(B)$</span>, then the (signed) opportunity cost of producing <span class="math-container">$B$</span> is <span class="math-container">$ dA/dB=F'(B)$</span>. Determining the sign of <span class="math-container">$F''(B)$</span> when <span class="math-container">$-dA/dB$</span> is increasing/decreasing will show why it is so.</p>

CC BY-SA 4.0
2022-03-06T13:21:06.167Z
2023-09-05T12:42:39.577Z
2023-09-05T12:42:39.577Z
Shaikh Ammar
<p>I am going to provide some intuition, being well aware that this is not a perfect substitute for a fully specified model. Very specialized technologies for each of the two goods may be very poor for producing intermediate amounts of goods. Think about having extremely high fixed costs of production for producing each good with the help of capital, while producing them without this fixed cost would have high variable costs. In that case, incurring the fixed costs for both goods just to produce a moderate amount of them will not be worth it, but due to high variable costs, you will not be able to produce a lot. If you move to specialization, the opportunity costs will decrease a lot, because the fixed costs is spread over a lot of output.</p>

CC BY-SA 4.0
2022-03-06T12:45:30.340Z
2022-03-06T12:45:30.340Z
jpfeifer
<p>A concave (bowed outward) PPC depicts an increasing opportunity cost. A convex (bowed inward) PPC depicts a decreasing opportunity cost. Incase of increasing opportunity cost PPC, the production combination is higher than incase of the decreasing opportunity cost PPC, which is counterintuitive. Why is this happening?</p>

CC BY-SA 4.0
2022-03-05T09:56:45.427Z
What do you mean with "production combination is higher"? The situation you describe sound like one where there are strong economies of scale. Producing a moderate amount of both goods will be relatively inefficient compared to concentrating on just one good.
jpfeifer
CC BY-SA 4.0
2022-03-05T10:03:58.847Z
Think of both the PPC's (increasing and decreasing), why combination of both products being produced is higher in increasing opportunity cost curve instead of decreasing opportunity cost curve? Think about this for a second.
Vinay Sharma
CC BY-SA 4.0
2022-03-13T18:23:26.220Z
These answers might be of some help: https://qr.ae/pGLAbN, https://qr.ae/pGLAbm
Amit
<microeconomics>
Production possibility frontier shape tells a story which I don't understand
Vinay Sharma
# Production possibility frontier shape tells a story which I don't understand

(Asked by: username_0 on 2022-03-05)

A concave (bowed outward) PPC depicts an increasing opportunity cost. A convex (bowed inward) PPC depicts a decreasing opportunity cost. Incase of increasing opportunity cost PPC, the production combination is higher than incase of the decreasing opportunity cost PPC, which is counterintuitive. Why is this happening?

**Tags:** microeconomics

> **Comments:**
> **username_1**: What do you mean with "production combination is higher"? The situation you describe sound like one where there are strong economies of scale. Producing a moderate amount of both goods will be relatively inefficient compared to concentrating on just one good.  
> **username_0**: Think of both the PPC's (increasing and decreasing), why combination of both products being produced is higher in increasing opportunity cost curve instead of decreasing opportunity cost curve? Think about this for a second.  
> **username_2**: These answers might be of some help: https://qr.ae/pGLAbN, https://qr.ae/pGLAbm  

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## 2 answers

### Answer by username_3 on 2022-03-06. Score: 2

It is apparent that the farther a combination is away from the origin, the more quantities are being produced in an aggregate sense.

When there is decreasing opportunity costs, it is cheaper to produce high amount of one commodity rather than produce both commodities, which is why the PPF is bowed in, and looks *kind of* asymtotic in both axes.

When there is increasing opportunity cost, it is cheaper to produce average amounts of both commodities rather than specialising in one (i.e., large amounts of one while little of the other), which is why the PPF is bowed out, i.e., combinations in *sort of a 45 degree angle* (where both commodities are being produced and neither is too favoured over the other) is farther from the origin.

Therefore, in the former case, the intercepts (the specialising region) is farther away from the origin than the *45 degree* part (non specialising region), while the reverse is true for latter.

You could use calculus to understand it formally. If there are two commodities $A$ and $B$, the PPF is $A=F(B)$, then the (signed) opportunity cost of producing $B$ is $ dA/dB=F'(B)$. Determining the sign of $F''(B)$ when $-dA/dB$ is increasing/decreasing will show why it is so.


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### Answer by username_1 on 2022-03-06. Score: 0

I am going to provide some intuition, being well aware that this is not a perfect substitute for a fully specified model. Very specialized technologies for each of the two goods may be very poor for producing intermediate amounts of goods. Think about having extremely high fixed costs of production for producing each good with the help of capital, while producing them without this fixed cost would have high variable costs. In that case, incurring the fixed costs for both goods just to produce a moderate amount of them will not be worth it, but due to high variable costs, you will not be able to produce a lot. If you move to specialization, the opportunity costs will decrease a lot, because the fixed costs is spread over a lot of output.


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