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Chapter 2: Problem 10

Suppose a nation's PPF shifts inward as its population grows. What happens, on average, to the material standard of living of the people? Explain your answer.

Short Answer

Expert verified
On average, the material standard of living decreases when a nation's PPF shifts inward due to population growth. This is because the per capita share of resources decreases, resulting in fewer goods and services available per person.

Step by step solution

01

Understanding PPF

The Production Possibility Frontier (PPF) is a curve that demonstrates the maximum feasible amounts of two commodities that an economy can achieve when using its available resources successfully. In this context, an inward movement of the PPF implies that the country's production potential has declined, possibly due to factors such as a decrease in available resources, or in this case, population growth.
02

Impact of population growth

When a country's population grows without a corresponding increase in resources, the per capita share of the available resources decreases. Basically, there are more people sharing the same level of resources, leading to a decrease in the resource share per individual.
03

Average material standard of living

The material standard of living refers to the amount of goods and services available to an average person within the population. If there's a decrease in the per capita share of resources due to population growth (as in the inflection of the PPF), this implies that the material standard of living for an average person in the population will also decrease as fewer goods and services are available per person.

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Most popular questions from this chapter

Within a PPF framework, explain each of the following: (a) a disagreement between a person who favors more domestic welfare spending and one who favors more national defense spending, (b) an increase in the population, and (c) a technological change that makes resources less specialized.

If the slope of the PPF is the same between any two points, what does this relationship imply about costs? Explain your answer.

Explain how to derive a PPF. For instance, how is the extreme point on the vertical axis identified? How is the extreme point on the horizontal axis identified?

Explain how the following can be represented in a PPF framework: (a) the finiteness of resources implicit in the scarcity condition, (b) choice, (c) opportunity cost, (d) productive efficiency, and (e) unemployed resources.

Can a technological advancement in sector \(X\) of the economy affect the number of people who work in sector \(Y\) of the economy? Explain your answer.
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