Answer to Question #236092 in Microeconomics for KAT

Question

 How is appoint of the contract curve for production interpreted? Is any point inside the PPF efficient? 

Answer 1

A point in a contract curve is interpreted as the representation of a final allocation of two goods that is between two individuals and it occurs due to a mutual beneficial trading results. All the points inside the PPT are efficient. It is because from any one point of the allocation the people feel satisfied and it does not affect the other person. The efficient point is arrived at by theindividuals performing trade from the initial holdings from the two goods.