12th Class Economics Solved Paper - Economics 2011 Outside Delhi Set-I

  • question_answer
    How is production possibility curve affected by unemployment in the economy? Explain.

    Answer:

    The number of people of working age without a job is usually expressed as an unemployment rate, a percentage of the workforce. Due to the presence of unemployment, the PPC of an economy would be affected adversely. This is because PPC depicts the amount of two goods that an economy can produce employing all its resources. Due to unemployment the economy will not operate on its full potential, and economy will operate on less efficient PPC.
                In the figure below, AB represents the PPC of an economy which is associated with the full employment of the resources. However, due to the presence of unemployment, the economy is operating at point U which is below the PPC. The point U depicts that the economy is operating below its full potential or efficiency level.


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