Question

Explain precisely why opporunity cost is always a relative concept and is never to be construed in absolute terms. In addition , why is the PPF function never strictly convex- what is the economic implication of strict convexity ?you are free to provide appropriate of your choice.

Answer 1

Answer:

Opportunity cost always a relative concept where the cost of foraging the next best alternative there the next best alternative is compared to current choice and this concept cannot be absolute.

PPF – Not strictly convex  

Because PPF slope = Marginal rate of transformation

Marginal rate of transformation – number of units of goods that must be foregone in order to create or to attain 1 unit of another good.

If PPF = Strictly convex then Marginal rate of transformation must be strictly decreasing which is impossible Marginal rate of transformation always increase due to scarcity of resources both goods to produce the goods.

For example if apple need to enhance there need to be a decrease in oranges