Question of the Day: Day Two


Your goal is to use the PPC model to explain how or why certain events affect the potential output (i.e. production possibilities) of a particular economy that only produces two different goods apples and figs. This economy (country) has a specific quantity of available labor, capital, land and entrepreneurship available to produce these two goods. All of the factors work at the same, set rate of productivity using production processes (i.e. technology) that are not expected to change in the short run.


1) Using the PPC model, explain how the migration of labor out of this country affects the production possibilities associated with these two goods.


2) Using the PPC model, explain how having suppliers buy more machines and equipment affect the production possibilities associated with these two goods.


3) Using the PPC model, explain how using fewer of the available laborers affects the production possibilities associated with these two goods. I.e., show how unemployment affects things.