Question

In the given figure X₁Y₁ and X₂Y₂ are Production Possibility Curves in two different time periods T₁ and T₂ respectively. A₁ and A₂ represent actual outputs in T₁ and T₂ periods respectively. P₁ and P₂ are potential outputs in T₁ and T₂ periods respectively. The change in potential production over the two periods would be represented by a shift from ______.

(Choose the correct alternative). 

Options

• P₂ to A₂

• A₁ to A₂

• A₂ to A₁

• P₁ to P₂

Answer 1

In the given figure X₁Y₁ and X₂Y₂ are Production Possibility Curves in two different time periods T₁ and T₂ respectively. A₁ and A₂ represent actual outputs in T₁ and T₂ periods respectively. P₁ and P₂ are potential outputs in T₁ and T₂ periods respectively. The change in potential production over the two periods would be represented by a shift from P₁ to P₂.

Explanation:

Potential production changes from potential output in period T₁ to potential output in period T₂, i.e. from P₁ to P₂.