microeconomics- PPDS, Markets and the allocation of resource diagrams

Question 1

what does this show

Answer 1

This PPD diagram shows growth in the economy

Question 2

what does this show

Answer 2

This can show a recession, because output is falling below the PPD

Question 3

what does this show

Answer 3

this PPD shows an increase in production of capital goods but a decrease in consumer goods

Question 4

What will happen to capital goods and consumer goods in the long run and the short run

Answer 4

As more resources will be devolved to capital goods, short-term consumer goods will go down. However, if the investment is successful, then in the long-run, productive capacity will increase and the PPD curve will shift to the right. Furthermore, in the longer run the increased investment in capital goods enables more output of capital goods to be produced.

Question 5

what will happen when there is a greater focus on consumer goods

Answer 5

NEED TO DO