marginal opportunity cost or marginal rate of transformation (moc or mrt)
1. By : Dhirendra Chauhan
Marginal
Opportunity Cost
“Marginal Rate of Transformation”
2. “MOC refers to the number of units of a commodity
sacrificed to gain one additional unit of another
commodity”
Marginal
Opportunity Cost
“it is the ration of additional loss of output(ΔY) to
additional gain of output(Δ X) when some resources are
shifted from the production of Y commodity to X
Commodity”
3. “It is the total loss of Output”
OR
The total opportunity cost of production of a commodity refers
to the total cost which the producer has to sacrifice in terms
of the next best alternative which could be produced out of
given resources and technology in order to produce the
total units of the given commodity.
Total Opportunity
Cost
4. “MOC or MRT is also know as a
slope of PPC”
MRT =
ΔY
ΔX
6. Properties of PPC on MOC
1. PPC slopes downwards
PPC slopes downwards from left to right because from the given resources ,
production of both the goods cannot be increased. More of good X can be
produced only by producing less of good Y. it is because resounces are
fixed
2. PPC is concave to the point of origin
A concave downward sloping curve has an increasing slope. i.e.- increasing
marginal opportunity coast or increasing MRT
7. Types of MOC
1. Increasing MOC
X Commodity
A
B X
Y
Y
Commodity
O
Combinations
A
B
C
D
E
X
Commodity
0
1
2
3
4
Y Commodity
100
90
70
40
0
MOC = ΔY/
ΔX
-
10÷1=10
20÷1=20
30÷1=30
40÷1=40
Concave PPC
1 2 4
3
100
80
60
40
20
0
8. Types of MOC
2. Deceasing MOC
X Commodity
A
B
X
Y
Y
Commodity
O
Combinations
A
B
C
D
E
X
Commodity
0
1
2
3
4
Y
Commodity
100
60
30
10
0
MOC = ΔY/
ΔX
-
40÷1=40
30÷1=30
20÷1=20
10÷1=10
Convex PPC
1 2 4
3
100
80
60
40
20
0
9. Types of MOC
3. “Constant MOC”
X Commodity
A
B X
Y
Y
Commodity
O
Combinations
A
B
C
D
E
F
X
Commodity
0
1
2
3
4
5
Y
Commodity
100
80
60
40
20
0
MOC = ΔY/
ΔX
-
20÷1=20
20÷1=20
20÷1=20
20÷1=20
20÷1=20
Straight Line
PPC
1 2 5
4
3
100
80
60
40
20
0
