Economics Production Possibility Frontier Questions Medium
The law of diminishing returns states that as more units of a variable input are added to a fixed input, the marginal product of the variable input will eventually decrease. In relation to the Production Possibility Frontier (PPF), the law of diminishing returns implies that as an economy allocates more resources towards the production of one good, the opportunity cost of producing additional units of that good increases. This means that the PPF becomes steeper, indicating that the economy must give up increasing amounts of the other good in order to produce more of the chosen good. In other words, the law of diminishing returns highlights the trade-off and limited nature of resources, which is reflected in the shape and slope of the PPF.