Let us say a modern-day Robinson Crusoe does two survival tasks, gathering coconuts and catching fish. In the following scenario, the castaway has been working 8 hours a day. What will happen to his/her production possibilities curve if s/he works 12 hours per day?
24 coconuts and 0 fish
20 coconuts and 1 fish
12 coconuts and 2 fish
0 coconuts and 3 fish
1 Answer | Add Yours
If this modern day Robinson Crusoe starts to work more hours per day, his or her production possibilities curve will (all other things being equal) move to the right.
One of the assumptions that underlies the whole idea of a production possibilities curve is that the economy is using all its resources as fully as it possibly can. This means that a point that is outside the curve (such as gathering 20 coconuts and catching 2 fish) is impossible given the current situation. In order to have economic growth (which in this case would involve being able to gather more coconuts and/or catch more fish), you need more resources.
In the scenario given above, you are adding more labor to the economy. This is an added resource which will allow the production possibilities curve to move to the right.
We’ve answered 318,931 questions. We can answer yours, too.Ask a question