Question

Long Answer type question

1.Why do central problems arise? Explain the problem of allocation

2.Draw a production possibility curve and show the following situations on the diagram: i)Full Employment ii)Under Utilization of resources iii) growth of resources

Answer 1

Answer:

1.The central problems of the economy arises because the resources in the economy are scarce and human wants are unlimited. Therefore, there is need for an efficient relationship between both the factors.

2.In the figure point, A indicates full employment of resources. It is on P1P1, the initial Production Possibility Curve. Point B indicates underemployment of resources. It is below PPC (P1P1). Point C (on a higher PPC) shows growth of resources.Read more on Sarthaks.com - https://www.sarthaks.com/77418/draw-a-ppc-showing-the-following-situations-i-full-employment-of-resources