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The slope of the production possibilities curve at any given point is called the marginal rate of transformation. It describes numerically the rate at which one good can be transformed into the other. It is also called the “marginal opportunity cost” of a commodity, that is, it is the opportunity cost of X in terms of Y at the margin.
If, for example, the (absolute) slope at point "BB" in the diagram is equal to 2, then, in order to produce one more computer, 2 units of food production must be sacrificed. If at "AA" for example, the marginal opportunity cost of computers in terms of food is equal to 0.25, then, the sacrifice of one unit of food could produce 4 computers.
The marginal rate of transformation can be expressed in terms of either commodity. The marginal opportunity costs of computers in terms of food is simply the reciprocal of the marginal opportunity cost of food in terms of computers.
Other related archivesEconomics of production, Edgeworth box, Microeconomics, Nash equilibrium, allocative efficiency, diminishing marginal returns, economics, efficiency, frontier, graph, inefficiency, inefficiently,
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