Task: A nation with fixed quantities of resources is able to produce any of the following combinations of bread and ovens.
Loaves of Bread Ovens
(Millions) (Thousands)
75 0
60 12
45 22
30 30
15 36
0 40
These figures assume that a certain number of previously produced ovens are available in the current period for baking bread.
A. Using the data in the table, graph the ppf (with ovens on the vertical axis).
B. If this country chooses to produce both ovens and bread, what will happen to the ppf over time? Why?
Now suppose that a new technology is discovered that allows twice as many loaves of bread to be baked in each existing oven.
C. Illustrate (on the original graph) the effect of this new technology on the production possibility curve.
D. Suppose that before the new technology is introduced, the nation produces 22 ovens. After the new technology is introduced, the nation produces 30 ovens. What is the effect of the new technology on the production of bread? (Give the number of loaves before and after the change).