Question

Illustrate the PPC. Please indicate on the graph a point of efficiency, a point of inefficiency and a point that would be unattainable with existing resources.

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Answer 1

Since the production possibility can be defined as a line which is summation of different combinations of two different goods which can be produced with the available resources by using it efficiently. If the technology improves or resources increase, then the PPF shifts outwards.

Since all the points on the PPF, shows the efficient utilization of the resources and all the allocations on the PPF are best.

Point B shows a point of efficiency.

Point A shows a point of inefficiency.

Point E would be unattainable with existing resources.

Point C and D are points which shows when resources are increased or technology have improved.