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Introduction of Micro-Economics — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsIntroduction of Micro-Economics3 Marks
Question
Does production take place only on the PP curve?
✓

Answer

The given statement may or may not be correct. If the given resources are fully and efficiently used in an economy, the production takes place on the PP curve. But if the resources in the economy are underutilised or inefficiently utilised or both, the production takes place inside the PP curve. The given figure illustrates the point.

On point F, and for that matter on any point on the production possibility curve OAB, the resources are fully and efficiently employed. On point U, below the PP curve or any other point, but below the PP curve, the resources are either underutilised or inefficiently utilised or both. Any point below the PP curve thus highlights the problem of unemployment and inefficiency in the economy.

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