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1.a.Let's assume a village only produces butter and cheese. Can we apply the Production Possibility Frontier...

1.a.Let's assume a village only produces butter and cheese. Can we apply the Production Possibility Frontier (PPF) model in this situation? Discuss why or why not.

b. How can the village achieve economic growth? Discuss using a PPF.

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Answer #1

Sol 1 :

a. Yes , Production possibility frontier can be applied in this case.

As, Producer have to make choice to produce which tyoe of goods.

As, PPC is made because of the following reason :

  • Resources are limited
  • These resources have alternative uses. .

So , producer have to decided which goods (i.e butter or cheese) .

b. Village can achieve economic growth by increasing the technology.

So , when technology increases , resources are used more efficiently and effectively which will increases the production.

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