Starting with AD₁ and AS₁ in the graph below, if resources become more productive: A) equilibrium in the economy moves from point c to point b B) equilibrium in the economy moves from point b to point c C) equilibrium in the economy moves from point c to point d D) equilibrium in the economy moves from point d to point c E) equilibrium in the economy moves from point c to point a

Question

Quizplus · Accepted Answer

The initial equilibrium is at point c where the production possibilities frontier (PPF) is tangent to the indifference curve for both AD₁ and AS₁. An increase in resource productivity opens up more production possibilities, so the PPF shifts outward. The new equilibrium is where the new PPF is tangent to the same indifference curve, which occurs at point d. Therefore, equilibrium moves from point c to point d.

Starting with AD1 and AS1 in the Graph Below, If

Starting with AD₁ and AS₁ in the Graph Below, If