Opportunity Cost - It is the cost of next best alternative foregone . It is the loss of other alternative when one alternative is chosen . Ex- John has given two job offers , one of 50 thousand p.m. and other is 60 thousand per month but John chooses the job offer of 50 thousand because the company has other perks too . Here the Opportunity Cost is 60 thousand . 

Marginal Opportunity Cost 



It refers to the no. of units of one commodity sacrificed to gain an additional unit of another commodity. Let say you have 10 apples and 5 apple drinks , in case you want an additional apple drink you will have to sacrifice 2 apples . Then, the Marginal Opportunity Cost is 2 apples for an apple drink . If someone sacrifices 6 units of good A to obtain 2 units of good B then the marginal opportunity cost will not be 2 , but the marginal rate of transformation.

M.O.C = No. of units sacrificed / an additional quantity gained 


Marginal Rate of Transformation 

Marginal Rate of Transformation is the ratio of number of units of a commodity sacrificed to gain an additional unit of another commodity. 

M.R.T= No. of units sacrificed / No. of units gained 


Production Possibility Curve 

Refers to the graphical representation of possible combination of two goods that can be produced with given resources and technology. 

It is also known by multiple names such as Production Possibility Frontier(PPF), Production Possibility Boundary(PPB), Transformational Curve and Transformational Boundary. 

Assumptions of PPC : 

  • The amount of resources in an economy is fixed , but these resources can be transferred from one use to another. 
  • With the help of given resources , only two goods can be produced. 
  • The resources are fully and efficiently utilised. 
  • Resources are not equally efficient in production of all products. (More and more units of goods are sacrificed to gain an additional units of other good)
  • The level of technology is assumed to be constant. 
Properties : 

  1. PPC slopes downwards- More production of one good is associated with the decline in production of other goods. "Inverse relationship between change in quantity of production. "
  2. PPC us concave shaped - You should always view graphs by using the origin as eye. Concave shape graphs will look like convex if you view them from top to bottom so always view from the origin. This shape is due to the "increasing rate of transformation "