Answer to Question #146440 in Microeconomics for Ryma

Question

Assume a country produces haircuts and shirts with inputs of labour. The country has 1000 hours of labour available. A haircut requires ½ hour of labour, while a shirt requires 5 hours of labour.
a. Construct country’s production- possibility frontier. (2 marks)
b. The country is faced with massive unemployment. How will the PPF be impacted? Explain and indicate on graph. ( 1 mark)
c. The country discovers new technology and moves towards automation. Justify how this will impact the PPF for the economy. Also, indicate the same through the graph. (1mark)

Answer 1

a. A country’s production- possibility frontier will be depicted with the line between the points (2,000 haircuts; 0 shirts) and (0 haircuts; 200 shirts).

b. If the country is faced with massive unemployment, then the PPF will decrease and shift to the left.

c. If the country discovers new technology and moves towards automation, then the PPF will increase and shift to the right.