Production possibilities curve and increasing opportunity cost
Channel: Werner Lost
Date: 2015-08-28

If you take a closer look at the opportunity cost of producing laptops, which is represented in the table below, what you will notice is that the opportunity cost increases as more laptops are produced. The opportunity cost of increasing the production of laptops from 0 to 1 000 is 2 000 mobile phones, whereas increasing the production of laptops from 3 000 to 4 000 is 8 000 mobile phones.

As increasingly more resources are allocated away from the production of mobile phones to the production of laptops, moving from point C to point B, fewer suitable resources are allocated to the production of laptops. Hence the opportunity cost of producing laptops rises - 8 000 mobile phones must be sacrificed to increase the production of laptops from 3 000 to 4 000.