Question

Q 7 a lot of people died and many factories were destroyed in an earthquake. how will it affect the ppf of the economy

Answer 1

PPF or Production Possibility Frontier shows the potential ability for producing two goods. This helps in showing one in which manner the resources for the production are allocated. When a natural disaster like an earthquake occurs, the PPF curve shifts to the left or inwards. This means that the economy can produce less. This is because, with an earthquake, the labour force and the factories are destroyed and not suitable for production. 

Answer 2

In such a situation, on account of decrease in availability of resources, the productive capacity of an economy will fall and the PPC will shift leftward, from A, E to A1, E1.