Consider an economy with a labour force of 10,000. Each worker can produce 100 kilograms of agricultural produce per year or 200 manufactured items.
a) Construct the production possibility frontier (PPF).
b) Suppose the labour force grows by 20 percent. Sketch the new PPF.
c) Suppose instead the productivity of each of the 10,000 workers increases by 40 percent. Sketch the new PPF.
d) Suppose the productivity growth of 40 percent had occurred only in manufacturing. Sketch the PPF.
e) What do you conclude about the effect of factor (i.e., labour supply) growth and productivity growth on the PPF