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1.1 Economic methodology and the economic problem

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Question 2

The production possibility frontier (PPF) diagram below shows an economy operating at point X on its boundary, producing a mix of consumer goods and capital goods.

Production possibility frontier (PPF) diagram

With no immediate change in the position of the PPF, the economy reallocates resources to increase the production of capital goods. Which one of the following combinations best describes the most likely consequence for the production of consumer goods in the short run and the long run?

Short-run change in consumer goods: Increase | Long-run change in consumer goods: Decrease

Short-run change in consumer goods: Increase | Long-run change in consumer goods: Increase

Short-run change in consumer goods: Decrease | Long-run change in consumer goods: Increase

Short-run change in consumer goods: Decrease | Long-run change in consumer goods: Decrease

1.1 Economic methodology and the economic problem Questions

  1. A Level
  2. /Economics
  3. /1.1 Economic methodology and the economic problem