Economics Production Possibility Frontier Questions Medium
A linear production possibility frontier (PPF) represents a constant opportunity cost between two goods. This means that resources can be easily reallocated between the production of the two goods without any additional costs or inefficiencies. The slope of a linear PPF remains constant, indicating a fixed trade-off between the production of the two goods.
On the other hand, a bowed-outward PPF represents increasing opportunity costs as more of one good is produced. This implies that resources are not perfectly adaptable between the production of the two goods, and as more of one good is produced, the opportunity cost of producing additional units of that good increases. The slope of a bowed-outward PPF becomes steeper as we move along the curve, indicating the increasing trade-off between the two goods.
In summary, the main difference between a linear and a bowed-outward PPF lies in the concept of opportunity cost. A linear PPF assumes a constant opportunity cost, while a bowed-outward PPF reflects increasing opportunity costs as more of one good is produced.