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.
⦁ Construct country’s production- possibility frontier. (2 marks)
⦁ The country is faced with massive unemployment. How will the PPF be impacted? Explain and indicate on graph. ( 1 mark)
⦁ 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. The possible frontier will be depicted with lines between points (2,000 haircuts;0 shirts) and (0 haircuts; 200 shirts)

B. When a country is faced with unemployment then PPF will decrease and shift to the left.

C. If a country discovers new technology and move towards automation, PPF will increase and shift to the right.