Given below is a production possibility schedule showing different quantities of two commodities – Cars and Computers which can be produced in an economy.
|
Cars |
Computers |
|
|
A. |
150 |
10 |
|
B. |
140 |
20 |
|
C. |
120 |
30 |
|
D. |
90 |
40 |
If we plot the above points on a graph, we get a Production Possibility Curve. Which of the following leads to a shift in PPC??
Answer & explanation
Correct answer: option 3
A shift in the Production Possibility Curve (PPC) occurs due to changes in factors such as resources or technology, which affect the economy's ability to produce goods.
Therefore, both of the following factors lead to a shift in the PPC: Option 3: Both of the above
Explanation:
1. Increase in resources: If there is an increase in the quantity or quality of resources available to the economy, such as labor, capital, or natural resources, it will expand the economy's production capacity. With more resources, the economy can produce more of both cars and computers, leading to an outward shift of the PPC.
2. Technological progress: Technological advancements improve the efficiency and productivity of production processes. With better technology, the economy can produce more output with the same amount of resources, or produce the same output with fewer resources. This leads to an increase in the economy's production capacity and results in an outward shift of the PPC.
Therefore, both an increase in resources and technological progress lead to shifts in the PPC, expanding the economy's production possibilities.