Question
8. what factors could shift the production curve in figure 2-6?

9. draw points in figure 2-6 that correspond to postions of
a. full employment
b. underemployment

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Answer #1

Ans) PPC will shift outwards if ÷

  • There is increase in factors of production i.e. land , labour or capital. Land can be increased due to capture of new territory, labour can be increased due to immigration or increase in population, capital can increase due to investment.
  • There is shift in technology, i.e new and more efficient technology is available.

PPC will shift inwards if÷

  • The factors of production are reduced may be due to war or natural calamity.
  • Deep recession as it reduces investment level.

Now, since PPC is made assuming full employment, any point on PPC curve will show full employment. Further, any point under the graph shows under utilization of factors of production i.e. inefficient technology or unemployment. So, the points A,B,C,D,E all show full employment. Points F, K, H show unemployment . Points I, G, L show unachievable efficiency.

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