Answer to Question #308601 in Microeconomics for Pramilla

Question

With reference to the PPC, assume Malaysia is producing 2 types of goods - manufactured goods and agricultural goods. It wants to increase both the output by 20% in 5 years. What steps should the government take to achieve this goal?

Answer 1

One way the government can increase production is by providing subsidies to the citizens venturing in manufacturing and agricultural sector. Subsidies ensures that the governments is catering for some expenses used in production making the burden to partly fall on the government. This will increase the interest of people to join these related sectors, therefore increasing productivity.

Incentives by the government like providing tax free holidays motivates the manufacturing and agricultural sector to increase their production, especially if the incentives are provided when a certain limit is provided by the government that needs to be achieved. Incentives helps both sectors by employing more people to increase their production to achieve the limit. Generally, this increases the productivity of the sectors.

The government can also provide grants to to the sectors for the people who have brilliant business ideas but do not have the capital to start it. This can be done after it has been determined that the business idea is viable and will not lead to a loss. This will lead to increase in productivity, especially in the agricultural sector, which is not as complicated and elaborate as the manufacturing industry.