Question

3.(a) What is a production possibility curve?
(b) Draw a production possibility curve and indicate: (i) point P, where resources are fully utilized; (ii) point U, where resources are under-utilized; (iii) point X, where production is not feasible
(c) Explain any two factors that can make production at point X feasible
(d) Why is the production possibility curve negatively sloped?

Accepted Answer

(a) Production possibility curve: This is the curve that shows the different combinations of two outputs which a country can produce using a given level of resources and technology.

(b) A production possibility curve should be drawn (a concave/bowed-out curve from one axis to another), with point P placed ON the curve (fully utilized resources), point U placed INSIDE/below the curve (under-utilized resources), and point X placed OUTSIDE/beyond the curve (production not feasible with current resources).

(c) Factors that can make production at point X feasible:
(i) If the level of technology is improved
(ii) If new resources and/or inputs are discovered

(d) The production possibility curve is negatively sloped because it indicates the rates of substitution of one commodity for another commodity — to produce more of one good, some of the other good must be given up.

WAEC Economics 2016 Theory — Question 3

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