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1.1 Economic methodology and the economic problem

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Question 6

The diagram below shows the production possibility curve (PPC) for an economy producing heavy diesel trucks and electric cargo vans. The initial combination of products being manufactured is represented by point W.

Production Possibility Curve

A shift in government subsidies and consumer preferences causes the heavy diesel truck industry to contract and the electric cargo van industry to expand.

If the structural mobility of labour between these two sectors is highly restricted because diesel mechanics cannot easily retrain to work on high-voltage electric drivetrains, then the new combination of heavy diesel trucks and electric cargo vans produced is most likely to be at

Point U\text{Point U}Point U

Point X\text{Point X}Point X

Point Y\text{Point Y}Point Y

Point Z\text{Point Z}Point Z

1.1 Economic methodology and the economic problem Questions

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