Question

Can anybody explain me the relationship of " Unemployment and PPC"???? plz it's urgent....

Answer 1

Massive unemployment does not decrease the capacity of economy to produce so there will be no shift in PPF. However economy will operate at some point inside the PPF due to unutilization of human resources.

A production possibility curve is a graphical representation of the various possibilities of producing two goods in an economy by combining the limited resources available, with the given technology. Unemployment in an economy, refers to any resource that is unemployed, and not put to full utilisation. If there is unemployment of resources in an economy, the economy will still have some resources that would not be fully utilised, and will thus function at a point inside the PPC. Thus, the situation will be represented by a point inside the PPC.

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