Why are most production possibility curves outward bowed (concave)? and Limitations of PPC

Ø Why are most production possibility curves outward bowed (concave)?

Production Possibility Curve is concave to the origin because to produce each additional unit of good X, more and more unit of good Y is to be sacrificed. Opportunity cost of producing every additional unit of good A tends to increase in terms of the loss of production of good Y. It is so because factors of production are not perfect substitute of each other.

Ø Limitations of PPC:

• Preferences: Production possibilities analysis is designed to analyze production capabilities. It can answer questions about the quantity of one good produced, given the production of another good. This analysis does not say if anyone actually wants the goods produced. Production possibilities says nothing about which goods people want and which provide the most satisfaction. It only indicates the available options.

Economic Efficiency: Because production possibilities is unrelated to preferences, it provides no indication of economic efficiency. While production possibilities might indicate what quantities can be produced, it does NOT indicate if this is an efficient use of resources. It does not indicate if this combination of goods provides the most satisfaction possible