Question
Draw PPC diagrams to illustrate the following situations:
a productively efficient economy experiencing economic growth
an economy becoming more productive in capital goods but remaining
at the same level in consumer goods
Answer
a) PPC diagram illustrating a productively efficient economy experiencing economic growth:
The PPC curve will shift outward, indicating an increase in the production of both capital and consumer goods.
b) PPC diagram illustrating an economy becoming more productive in capital goods but remaining at the same level in consumer goods:
The PPC curve will shift outward in the capital goods sector, indicating an increase in the production of capital goods, while remaining unchanged in the consumer goods sector.