An improvement in technology will cause:(a) The PPF to shift inwards towards the origin;(b) The PPF to shift outwards away from the origin;(c) The economy to move down the PPF which will not have shifted;(d) The economy to shift upwards along the PPF.
Question
An improvement in technology will cause:(a) The PPF to shift inwards towards the origin;(b) The PPF to shift outwards away from the origin;(c) The economy to move down the PPF which will not have shifted;(d) The economy to shift upwards along the PPF.
Solution
The correct answer is (b) The PPF (Production Possibility Frontier) to shift outwards away from the origin.
Here's why:
The Production Possibility Frontier (PPF) is a curve that shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed.
When technology improves, it means that the same amount of resources can produce more goods or services than before. This increases the productive potential of an economy, allowing it to produce more of both goods.
As a result, the PPF shifts outwards, away from the origin. This represents an increase in the maximum possible output for the economy.
Options (a), (c), and (d) are incorrect. An improvement in technology does not cause the PPF to shift inwards (a), nor does it cause the economy to move down the PPF (c) or shift upwards along the PPF (d). These scenarios could occur due to other factors, but not due to an improvement in technology.
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