3.

(B) Using production possibilities (PPF) diagrams , distinguish between

‘bowed outward PPF’ and ‘ straight line PPF ‘.
A
10
B
9
Straight-line 8
PPF 7 C
6
5
4
D
3
2
1
Constant Opportunity Costs E
0
From point A to B to E 1 2 3 4
Opportunity cost of 1 cars = 2 Bikes Increasing Opportunity Costs
Point A to B : Opportunity cost of 1
coffee maker =9 cell phone
Point B to C: Opportunity cost of 1
coffee maker=7 cell phone
Point C to D:Opportunity cost of 1
coffee maker=4 cell phone
 Shapes of PPF
1. Straight line PPF
Indicates constant opportunity
costs
The production of a good is
accompanied by foregoing the
same quantity of the other
good.
This is because all resources are
equally suited at producing the
same good.
2. Bowed Outward PPF
Indicates increasing opportunity
costs
The production of a good is
accompanied by foregoing
increasing quantity of the other
good.
This is because not all resources
are equally suited at producing
the same good.