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The law of increasing opportunity costs

Production possibilities curve shows that the increase in the production of one good is only possible due to the simultaneous reduction of the production of other goods.

Content selection problem is that if an economic source used to meet the needs of society controlled, there always exists the possibility of its application alternative. That which society refuses, called imputed (hidden or alternative) costs of achieving selected result.

The opportunity cost of any benefits - the number of other benefits, which must be sacrificed in order to obtain an additional unit of the good.

Production possibilities curve is convex from the point of origin, demonstrating that the increase in the production of one good is accompanied by a large decline in the production of other goods.

Based on these observations, we can formulate the law of increasing opportunity costs: full employment in the economy by increasing the production of one good to sacrifice more and more of other goods. In other words, the production of each additional unit of good Y is connected to the community with the loss of more and more good X.

The law of increasing opportunity costs due to the specific use of resources. In the production of alternative products are used both universal and specialized resources. They vary in quality and are not completely interchangeable.

An efficiently functioning economic entity initially involve in the production of the most suitable, and therefore the most effective resources and only after exhaustion - less suitable. Therefore, additional production units one good generic resources used initially, and then engage specific production less efficient resources that can be used only in part.

Furthermore, the production of alternative products differ significantly rates of the same materials. With limited resources and a lack of interchangeability of opportunity costs will increase with the expansion of the production of alternative goods. If any unit of resources would be equally suitable for the production of alternative products, the production possibilities curve would be a direct

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