Production Possibilities Frontier – Curve bending – A New Insight

In my previous blog of Production Possibilities Frontier which addressed why curve is bent outward. In my recent lecture after discussing its shifting because change in resource or technology which was common for both products and it rotates if there is a change in conditions of one product only. There was another session about why we draw it outward bent in first place why cant it be drawn straight or inward at the start. So in this blog I will be addressing this discussion.

So in the last blog we concluded that it is bent outward because of the imperfect substitute-ability of resources which led the central solution having appropriate allocation of inputs to their productive sectors let an outcome which had higher benefits as compared to corner solutions.

Now lets see why it can or cannot be bent inward, see from the corner solution where two different types of labor are working in the wheat sector, it can be inward bent only when we mistakenly send the farmers to work in the computer sector and keep the computer engineers in the wheat sector which will lead to a loss in the central solution. It looks that the decision maker is making one mistake over another mistake which might not happen in reality for a rational decision maker. So we can conclude that for the case of Production Possibilities Frontier it will not be inward bent.

ppf Now we look at the case of straight line Production Possibilities Frontier, if we assume that same labor can efficiently work in both sectors then we can make a straight line PPF which will be the ideal case but in reality there are many products which are specialized restricting any labor to come and work. So the red arrows in above diagram shows the degree of bent in the PPF which describes how much these products are different to each other in terms of their specialization. Means to say of the two products on the PPF are almost homogeneous like  Butter and Cheese then the degree of bent will be smaller. As the degree of bent is larger the role of specialization becomes more and more fruitful for the decision maker and the country. So from now on I will be addressing the PPF from these both straight line and bent outward case and then the role of labor training or labor specialization will be addressed from the degree of bent of this curve.


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