Macroeconomics
3. Decreasing opportunity cost: Finally, this is a scenario where the PPC is
curvedinwards(bowedin) toreflecta decrease in opportunity cost as you move alongthecurve.Althoughrarein practice, this happens when the value of the frst good given up to increase the production of the second one decreases as you move along the PPC. Example: NowusethisPPCtocalculate the per unit opportunity costs of the same movements: ● Movement from C to D: 1 airplane per yacht ● Movement from D to E: 0.33 airplanes per yacht Notice how the opportunity cost, or the quantity of airplanes foregone toproducemoreyachts, decreased from one point to another. All of these examples illustrate how the opportunity cost changes as production shifts between airplanesandyachts(oranytwogoodsonthePPC).Eachmovealongthecurveinvolvestradingoffsome airplanesforyachts,andthecalculatedopportunitycosthelpsusunderstandthecostofmakingthese choices and allocating resources. Analyzing Diferent Points on the PPC Diagram NowthatwehaveexplainedthedifferentshapesofthePPC,itistimetoanalyzeitspoints.Isapointon the curve the same as one below it? What does a point beyond the curve mean?
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