Essay 1

 An economy is faced by the exhaustion of an important natural resource at a time when it is introducing improved technology. Explain how these events will affect the economy's production possibility curve.

Production possibility curve is a curve that shows the various possible combinations of two goods a country can produce if all its resources are fully utilized

Let's say that the economy of a country is currently at ppc 1. At any points on ppc 1, the resources are fully utilized. The natural resource used in this example is minerals which are used to produce aluminium and airplanes. Excess and uncontrolled mining by humans may cause minerals to deplete. This will then lead to a change in the ppc causing ppc 1 to shift inwards to ppc 2. At any points on ppc 2, the resources are fully utilized. The total output of airplanes and aluminium have decrease as the resources have decrease.

We assume that the economy of a country is at ppc 1. At ppc 1, the country produces 20 units of aluminium when it produces 30 units of airplanes. When the country wants to produce 40 units of aluminium, it can only produce 10 units of airplanes. The opportunity cost of producing 40 units of aluminium is 20 units of airplanes. An improvement in technology will increase the production of goods and services. An improvement in technology causes ppc 1 to shift outwards to ppc 2. The country is then able to produce 30 units of airplanes and 60 units of aluminium reducing the opportunity cost.