The Law of Increasing Opportunity Cost and the PPC Model

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In a previous lesson we introduced the basic economic concepts of scarcity, opportunity cost, and the production possibilities curve (PPC). In that lesson, we examined the tradeoffs an individual faces in the use of her time between “work” and “play”. We showed that the opportunity cost of one hour of work is always the one hour of play that the individual could have enjoyed instead.

The constant opportunitiy cost between work and play is illustrated in the PPC model as a straight line production possibilities curve. In this lesson, we will expand our understanding of the PPC and opportunity costs by examining the tradeoff a nation faces between the production of two goods using its scarce resources. Cars and pizzas require very different resources to produce, and therefore, as the production of one good increases, the opportunity cost of its production in terms of the other good increases.

The result is a PPC that is bowed outwards from the origin. When choosing between the production of two goods, the more similar the resources needed to produce each good, the straighter the PPC will be. The less similar the resources needed to produce each good, the further the PPC will be bowed out from the origin.

http://www.econclassroom.com/?p=4403

Comments

吴霖 says:

草 有没有中文

flawliss20 says:

Good video man. I just started economics class and this helps a lot.

Nicole Campos says:

thank you so much, you're the reason im going to pass economics 101 this semester bc my econ professor is so unclear

Kaiyin Zhong says:

What is the previous lesson? This is clearly the first?

Darren .D says:

great video! million thanks

MUHAMMAD TOP VISION ISLAMIC DAWAH SQUAD says:

SORRY, you went wrong at 05:28 by saying ✘"4 million cars"✘

U should have said ❤❕✅4000 cars✅❕❤

ANYWAYS;
❤❤❤THANKS A BUNCH❤❤❤

aditya wadhawan says:

thank you :* you rock

Laura M says:

This was great! We need more simple explanations like this!

Brilliant Writer says:

Totally helpful! Hehe..

Brilliant Writer says:

Thank you so much for this video.
I need to admit that I find it's very difficult for me to understand economics. Even though I am just beginning to learn about microeconomics, it's still hard for me. I honestly prefer calculation (Calculus 1 and 2) subjects compared to economics. But you did a good job explaining things that aren't in the textbook! 😀 That was some math up there, thank God! Now I understand better. Hihi. Please continue explaining economics, people like me really need this :)

Never back says:

Thank you!!!!

shelbiely says:

This was so helpfull! thank you.

Brenda Wijaya says:

good video :)

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