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| 1. |
What is a production possibility frontier |
| Answer» \tProduction possibility frontier or production possibility curve\xa0shows all possible combinations of two set of goods that an economy can produce with available\xa0resources and given\xa0technology, assuming that all resources are fully and efficiently utilized.\tEconomizing of resources\xa0means utilisation\xa0of resources in best possible manner to maximize output.\tProduction Possibility Frontier or Curve\xa0Features(a) Slopes downward from left to right because if production of one commodity\xa0is to be increased then production of other commodity\xa0has to be sacrificed as there is scarcity of resources.(b) Concave to the origin because of increasing marginal opportunity cost or (MRT)\t\tThe Production possibility curve will shift under following two condition:(a) change in resources, (b) Change in technology of production for both the goods.\t\tRightward shift of PPF\xa0shows increase in resources or improvement in technology.Ex- Labour becoming more skilled, improvement in technology, increase in productivity of land.\tLeftward shift of PPF\xa0shows the decrease in resources or degradation of\xa0technology in the economy.\tThe Production possibility curve will rotate outward\xa0under following two condition: (a) Improvement in technology in favour of one commodity (b) Growth of resources for the production of one commodity\t | |