Question

Apply the concept of PPC to explain the problem of scarcity.

Answer 1

Production possibility curve shows all different attainable combinations of the production of two commodities that can be produced in an economy with given the resources and technology which are to be fully utilised.

'Scarcity' is revealed by the fact that any movement along the PPC (like moving from point D to F), So if the production of good-x is increased from R to S then the production of good-y decreases from C to E which indicates that the resources are limited or scarce because if production of one good increases then the production of the other decreases.