A production possibilities frontier (PPF) is a straight line when the opportunity cost is constant. This occurs when resources are perfectly substitutable between the production of two goods, meaning that factors of production are not specialized and can be substituted at no extra cost. Under these conditions, the trade-off between the goods is constant, resulting in a linear PPF rather than a curved one.
Key Points
- A straight-line PPF reflects constant opportunity costs because the resources used for production can shift between goods without changing the trade-off ratio.
- This situation usually arises when the goods produced require similar resources or factors of production that are easily adaptable.
- When resources are specialized or less adaptable, the PPF is typically curved, indicating increasing or decreasing opportunity costs.
Summary
Thus, a PPF becomes a straight line when the opportunity cost is constant, due to perfect substitutability of production factors and no specialization in resources, leading to a linear trade-off between the goods produced.
