Take a look at the PPC to the left. The two axis represents 2 big categories of
ID: 1145846 • Letter: T
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Take a look at the PPC to the left. The two axis represents 2 big categories of goods Consumer goods are those that you and I buy and are no generally used for producing other goods and services Capital goods are durable goods or any non-financial asset that are used by firms in production of goods or services. Capital goods are needed to produce consume goods Answer the following. 1. Would an economy every want to produce at point A or B? Why/Why not? 2. Could an economy ever produce at point E? How? Can you tell, without any additional information, whether this economy should produce at point C Explain. 3. vs. p This PPC is bowed outward a bit. It's not a straight line; the slope gets steeper and steeper as you mo the PPC. What does this mean? What would it mean if the slope of the PPC was constant, that is, if it straight line instead of curved? 4. When an economy grows, it's PPC curve shifts to the right. Does the combination of consumer and goods chosen by the economy affect how fast the economy can grow? 5.Explanation / Answer
1. No, no economic would ever want to produce at point A or B because it is underproduction.
2. Yes. An economy could produce at point E if the input is increased and improved techniques of production are used. It is what we call economic growth.
3. (This question is cropped out and is incomplete. So I'm answering it assuming that you want me to compare production at point C and point E)
At point C, it is an underproduction and no economy would ever want that. Point E represents overall increase in production and economic growth. Hence, an economy should produce at point E.
4. The PPC is bowed outward a bit because of the law of increasing opportunity cost. If production of one goods rises, the opportunity of producing that good rises too.
If the slope of the PPC was a straight line, it would mean that opportunity cost is constant.
5. The combination of consumer and capital goods does not necessarily lead to economic growth. Economic growth is achieved by using better techniques of production and increasing the input.
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