Question
How is production possibility frontier affected when resources are inefficiently employed in an economy?
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Answer
Production possibility frontier (PPF) is drawn on the assumption that the given resources are fully as well as efficiently utilised, along with the given technology. If resources are inefficiently employed in an economy, it implies that the economy is not maximising its output with the given resources. It is a situation when the concerned economy is NOT operating on the production possibility frontier, but is somewhere within the production possibility frontier. So that, it is possible to increase the level of output of Good-X, or Good-Y, or both X and Y.
Fig. 20 illustrates this situation.
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