Question

Explain the problem of fuller utilisation of resources with the help of the production possibility curve.

Answer 1

Resources are limited (scarce) in relation to demand for them. But when these scarce resources are not be utilised or employed efficiently, it leads to a problem of fuller utilisation of resources. This can be explained with the help of the PPC curve.

The problem of efficiency can be judged by only one factor, i.e., whether the point lies on the PPC curve or inside the curve. If resources are underutilised, production will always be inside the PPC curve. For instance, at point U, we have under-employment of resources and there is the problem of fuller utilisation.