Question

How is production possibility curve affected by unemployment in the economy? Explain.

Explain how a production possibility curve is affected when resources are inefficiently employed in an economy.

Answer 1

Unemployment or inefficient use of resources does not, by itself, shift the PPC because it does not reduce the economy’s productive capacity. Instead, actual production occurs at a point inside the PPC. If these resources are brought into use more fully, production moves from that interior point towards the curve.