What Is the Law of Increasing Opportunity Cost?
The law of increasing opportunity cost refers to the increasing opportunity cost of each unit of output of a given product under the conditions of established economic resources and production technology, that is, to abandon the output of more products.
Opportunity cost increasing rule
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- Chinese name
- Opportunity cost increasing rule
- Foreign name
- the law of increaing cost
- Category
- Economic law
- Related disciplines
- economic
- The law of increasing opportunity cost refers to the increasing opportunity cost of each unit of output of a given product under the conditions of established economic resources and production technology, that is, to abandon the output of more products.
- Limited resources and incomplete substitution among factors are the reasons for the increasing opportunity cost. On the one hand, due to limited resources, as the output of one product increases, the other economic resources used to produce it gradually decrease, resulting in relative economic resources. Scarcity, price increase, and given the constant production of other products abandoned, the maximum benefit abandoned is the increase of opportunity cost; on the other hand, due to the law of decreasing marginal technological substitution, that is, under the premise of maintaining constant output As the input of one factor of production continues to increase, the quantity of another factor of production that can be replaced by each unit of factor of production decreases, in other words, the opportunity cost increases. This can also be used to explain why the production possibility curve is concave toward the origin (sometimes called "convexity").