Answer to Question #194950 in Microeconomics for Narendra

Question

How has COVID-19 affected a country’s ability to achieve production efficiency? Provide specific examples or describe how current production relates to an economy-wide PPF conceptually and graphically.​

Answer 1

The production possibility curve indicates alternate combination of two goods which can be produced using the available resources in the economy. The production possibility curve or frontier is concave to origin which reflects the increasing the opportunity cost as production of good indicated on x-axis increases. The production possibility curve is indicated as follows:

Where,

Point A, B, and C denotes the production points.

A - It is efficient Production point as it is on the production possibility curve (PPC). The efficient production point is a point where it is not possible to produce more quantity of X without compromising the production of good Y. 

B- This is unattainable production point as it is beyond the PPC.

C - This is inefficient production point as it is inside the PPC. This production point does not uses its all resources or its full capacity of production. 

The COVID-19 was originated in 2019 and it is claimed to be originated from the China. This outbreak of the coronavirus spread in all over the world and it turned out to be coronavirus pandemic. This is very contagious virus and damages the lungs of people. There is only one way to avoid the spread of this virus is social distancing. 

As a result of this pandemic, the government of the all corona affected countries like India, USA, UK, Brazil etc. had to partially or fully locked down the country for the required time period. It resulted the locking of all trade of goods and services except necessary goods or services like grocery items, medicines etc. Thus, the supply chain of the economy got disrupted by this pandemic and it resulted the inefficiency of the production as producers are not able to produce at their potential level. 

Hence, the economy is not working at its potential level and working inside the production possibility of the country Thus, the production is inefficient in the economy due to coronavirus pandemic.