Unit 1 - Production possibilities curve (PPC)

part 3

type of cost

increasing opportunity cost

type of cost

constant opportunity cost

for IOC variation of opportunity cost is due to

specialisation of factors of production

specialisation of FOP leads to

constraints on the allocation of resources

at extremes

increase in opportunity cost

for COC resources are

completely flexible and equally suited to producing either good

for COC change in allocation leads to

constant amount of increase in other good

Ceteris paribus assumption

excluding investigated thing all others remain unchanged