Which of the following definition is correct answer of the production possibility set of the economy ?
Answer & explanation
Correct answer: option 2
The correct answer is option (2) : The collection of all possible combination of goods and services that can be produced from a given amount of resources and a given stock of technological knowledge
Here's why:
The production possibility set (PPS) represents the feasible output combinations for an economy. It considers limitations like a fixed amount of resources (land, labor, capital) and a specific level of technological knowledge. It defines the maximum achievable production levels for different goods and services given these constraints.