Answer to Question #247167 in Microeconomics for Chilu

Question

d. The production possibility frontier for X and Y consists of all the efficient allocations in the Edgeworth box. Explain why this is so. Also explain why inefficient points in the box would be inside the production possibility frontier.

Answer 1

Edgeworth diagram is utilized to show the different dissemination of assets. It likewise can be utilized to show how a creation outskirt is built for an economy all in all.

Total labor has been measured horizontally and total capital has been shown vertically.

Production possibility frontier for X and Y comprises the relative multitude of effective portions in the Edgeworth box. Here, production can't be expanded further. On other hand, inside the production possibility frontier, the production of one or the other great or both can be expanded; henceforth, focuses inside the production possibility frontier can't be taken as effective focuses.