Question

Guatemala produces either 1000 pounds of coffee or 3000 pounds of sugar in a year. Then for every one pound of coffee produced, give up 3 pound of sugar, hence opportunity cost of producing coffee in terms of sugar is constant & hence PPC is a linear graph.

PPC 3000 2400 1800 1200 600 coffee (in pounds)

Going back to the original PPC in the first question, there is now a new change. An influx of immigrants has allowed all sectors of the economy to increase employment. How would you show this on the PPC? (How would this current graph of the current PPC change to a different graph PPC. Please upload a graph.)

Answer 1

Influx of immigrants to the country, has increased the input factor of production (labor force). It will increase the output level in the sugar production as well as coffee production. So, new PPC curve will move in outward direction where the production of sugar and coffee, both will increase. As a result, new PPC with bigger output level, will be crated.