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Question

1.Government has given subsidies on imploration of resources like coal mines . What is its economic value in context of PPC.2 small scale industries have startef by government on large scale state its economic vale in PPC

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Solution

1. Since, government has decided to provide subsidies, so the cost of extracting the natural resources will be now fall. Besides this, the availability of natural resources will be more and resources will be efficiently and optimally utilised. Hence, the initial PPC (which is drawn with the availability of earlier endowment of resources) will now shift outwards parallely (i.e. rightward shift).

Economic value- Efficient and optimum utilisation of resources

2. Since, government has expanded the scale of operations of small scale industries, so now, these industries will be benefitted from large scale operations. Such benefits can be in form of low cost of production, large volume of production, expansion of production capacity, easy and cheap availability of ready credit, raw materials and many other similar benefits. Also these advantages will together push-up the operations of small-scale industries, which will be push the initial PPC curve rightwards parallely. Hence, now, more units will be produced and economy will be benefitted more.

Economic value- Large scale production, social benefit in terms of employment generation, promotion of native and vulnerable domestic industries.

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