In which of the following case will PPC shift to the left?
Answer & explanation
Correct answer: option 2
The correct answer is option 2: Loss of human life due to natural calamity
The Production Possibility Curve (PPC) represents the maximum feasible output combinations of two goods or services that an economy can achieve given its resources and technology. A shift to the left of the PPC indicates a reduction in the economy’s production capacity.
The PPC shifts to the left in the following cases:
- Decrease in the availability of resources
- Deterioration of technology
Here’s how each option affects the PPC:
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Over-utilisation of resources: This typically results in operating on the PPC but does not shift the PPC itself. It represents a temporary situation where resources are used more intensively.
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Loss of human life due to natural calamity: This can lead to a reduction in the available workforce and overall production capacity, causing the PPC to shift to the left.
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Growth of resources: This would lead to an increase in the economy’s production capacity and would shift the PPC to the right, not to the left.
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Technical improvement: This enhances productivity and efficiency, shifting the PPC to the right as it enables more output with the same resources.