Question

Suppose you are taking two courses. Your scarce resource is study time, which you divide between the two courses to produce "grades" in each. What would cause an outward shift in the production function (study time is fixed) so that you can achieve a higher grade in economics without reducing the grade in the other course?

Answer 1

Answer:

An outward shift in production possibility when resources are fixed is caused by improvement in technology which increases productivity.

Explanation:

A production possibility curve shows the different combination of two goods that can be produced using the fixed resources. Here, the two goods are grades in two courses and the fixed resource is study time.

The outward shift in PPF shows an increase in output level. Output level may increase because of several reasons.

1. Increase in resources
2. Improvement in technology
3. Improvement in human capital

Here, the resources i.e study time is assumed to be fixed. So, the increase in output level can be because of improvement in technology or in human capital which further helps in increasing productivity.