Why are economies depicted as having a production possibilities curve that is bowed out?

The production possibilities curve (PPC) is typically bowed out due to the differences in how resources are utilized for various types of production. This phenomenon is related to the fact that not all resources are equally efficient in producing all types of goods. When reallocating resources from the production of one good to another, the opportunity cost increases. This results from using resources that are better suited for one type of production on another, less suited use.

For instance, consider an economy that produces both cars and computers. If it starts producing more cars, it may initially reallocate resources that can adapt easily to car production. However, as it continues to increase car production and reallocates more resources, it will have to use resources that are less efficient in that production, such as workers who have specialized skills in computer manufacturing. Consequently, the trade-off becomes steeper, leading to the bowed-out shape of the PPC.

Thus, the curvature of the PPC reflects the idea that as an economy aims to produce more of one good, it must sacrifice increasingly larger amounts of the other good, which illustrates the concept of increasing opportunity costs.