Question

Giving reason comment on the shape of production possibilities curve based on the following schedule:

$\begin{array}{cccccc}\text{Goods-X}& 0& 1& 2& 3& 4\\ \text{Units}& & & & & \\ \text{Goods-Y}& 8& 6& 4& 2& 0\\ \text{Units}& & & & & \end{array}$

Answer 1

$\begin{array}{ccc}\text{Goods-X}& \text{Goods - Y}& \text{Marginal Opportunity}\\ \text{(Units)}& \text{(Units)}& \text{Cost}\\ 0& 8& -\\ 1& 6& \frac{2}{1}=2\\ 2& 4& \frac{2}{1}=2\\ 3& 2& \frac{2}{1}=2\\ 4& 0& \frac{2}{1}=2\end{array}$

The schedule shows that the marginal opportunity cost of producing more of Goods - X in place of Goods - Y is constant. Accordingly, production possibility curve is to be a downward sloping straight line.