Question

Explain how each of the following situations would affect a nation’s production possibilities curve. a. A group of vocational schools are established for training low-skilled adults. b. An unexpected drought hits the rural areas of a country. c. People migrate to other countries because of unstable pol- ity in the domestic country. d. The allowance for the unemployed workers is increased to 20 percent by the government, resulting in more workers being unemployed and remaining so for a longer period of time. e. Aninnovationinsolartechnologyallowsformoreeffi- cient conversion of solar power to electricity. f. An earthquake destroyed the infrastructure of a prov- ince, which significantly reduced the nation’s productive capacity

Answer 1

a. A group of vocational schools are established for training low-skilled adults. - The production possibility curve will shift to the right.

The training would provide more skills to the low skilled adults which would increase the productivity of labor. This would make the production possibility curve to shift to the right.

b. An unexpected drought hits the rural areas of a country. - The production possibility curve will shift to the left.

The drought reduces the production capabilities in the rural areas so the production possibility curve shifts to the left.

c. People migrate to other countries because of unstable pol- ity in the domestic country. - The production possibility curve will shift to the left.

Migration of people to other countries reduces the amount of labor available in the domestic country which makes the production possibility curve to shift to the left.

d. The allowance for the unemployed workers is increased to 20 percent by the government, resulting in more workers being unemployed and remaining so for a longer period of time. - The production possibility curve shifts to the left.

The allowance for the unemployed workers increases unemployment which means that it decreases the labor available and so the production possibility curve shifts to the left.

e. An innovation in solar technology allows for more efficient conversion of solar power to electricity. - The production possibility curve shifts to the right.

The innovation in solar technology leads to more efficiency and increase in productivity and hence the production possibility curve shifts to the right.

f. An earthquake destroyed the infrastructure of a prov- ince, which significantly reduced the nation’s productive capacity - The production possibility curve shifts to the left.

The earthquake destroyed the nation's productive capacitiy which means that the amount of resource available reduces and so the production possibility curve shifts to the left.