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assume there are only two goods in the world: pizza and electric fans. Draw(Electronically Not By...

assume there are only two goods in the world: pizza and electric fans. Draw(Electronically Not By Hand) a production possibility frontier (PPF) illustrating the trade-off between the two (specific numbers are not needed – we are only looking for the basic shape of the PPF). On the same graph, draw new frontiers showing 1) what happens if a major plague reduced worldwide population significantly, and 2) if a machine is invented which doubles the number of fans that can be made in a day (but is irrelevant in the production of pizza).

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Answer #1

The PPF representing the production of two goods: pizza and electric fans is below: Electric fan pizza a) If a major plague reduced worldwide population, then workers producing the goods would also fall. This would lead to a reduction in the production of both pizza and electric fans, thereby shifting the PPF inwards, as below: Electric fan pizza

b) If a machine is invented which doubles the number of fans that can be made in day, then the production of fans in the economy would increase while pizza production would remain unchanged. Thus, the PPF would swivel outwards to the right from the y-axis. This can be seen as below: Electric fan pizza

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