3. Shifts in production possibilities Suppose Bulgaria produces two types of goo

Question

3. Shifts in production possibilities

Suppose Bulgaria produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier (also known as the production possibilities curve) for corn, an agricultural good, and airplanes, a capital good.

Drag the production possibilities frontier (PPF) on the graph to show the effects of an immigration law that results in fewer workers entering the country.

Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.

Explanation / Answer

Shift in PPF curve :
-Outward shift : productivity rises due improvement in production technology as a result of research development and innovation and favorable investment expectation. ( Production of both goods or one good will rise and PPF will shift outward)
Inward shift: due to loss of productivity as a result of diminishing return, imitation,lack of innovation, lack of investment prospect( production of one or both will diminish).
-Workers are considered as human capital. Therefore health improvement will definitely improve the quality of human capital and thus productivity.
-Longer careers means entry point delay and that may cause some problem for younger generation. Therefore retirement age is fixed in most of the countries.

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