Question

(a) Use (draw) a production possibility frontier (PPF) to show the economy’s trade-off between unpolluted air and high incomes. Outline the assumptions you have made with the positioning and shape of the curve (50-100 words).

(b) Re-draw your curve to show what happens if through research and development civil engineers invent a jet engine that produces very little air pollution. Explain the shape and position of the new frontier and include all assumptions. (50-100 words).

Answer 1

a) Production possibility curve explains about the tradeoff between to goods that can be produced with the help of given technologies. Here we consider about the unpolluted air and increasing income. We can understand that when the income increases the level of unpolluted air that is we can call it as the fresh air reduces in the atmosphere. It's because of the increase in production due to increase in income production in factories, use of petroleum products etc can cause air pollution it will destroy the fresh air in the economy, so we can use production possibility curve to explain this problem.

The shape and the positioning of the production possibility curve(PPC) depends upon the cost that we are ready to spend to maintained the fresh air in the society. Generally production possibility curve explains about the sacrificing amount of one good in order to watching the other one. So in this case in order to increase the income through production we have to sacrifice a little bit of fresh air. It can be in a reverse action also in order to increase the level of unpolluted air we can reduce our production activity which leads to higher income. this can be explained with the help of a PPC which shows the shape and the position of sacrifice. Shape of PPC is always diminished because it shows the sacrificing rate.

Here in the figure we explain about the tradeoff between unpolluted air and higher income. On the y-axis we measure the unpolluted air and on the x axis we measure higher income level. At the point A we can see that the unpolluted air is maximum and the level of income is comparatively low, when there is a sacrifice made in the unpolluted air to the point B the level of income has increased. It shows that when we make a sacrifice in one good we gain the output from the other good. Here when we sacrificed unpolluted air we got higher income level this is what PPC shows-'the trade off'.

b). The second question explains about the shift in the curve of PPC only in the unpolluted air (y-axis). The question explains about the situation,after doing a lot of research and development using the technology the engineers have found jet engine that produces very little air pollution. It shows increase in unpolluted air and the level of income is not affected. This can be illustrated using the figure.

It's clearly depicted that the PPC has shifted to P2 from P1 because of the new invention made by the engineers using the technology the level of income remains constant whereas the unpolluted air has increased. Because of the additional technology used by the researchers we can live in an economy with unpolluted air and higher income. Even if the production increases the unpolluted air is stable in this situation.