Question

In one to two sentences, explain what happens to a production possibilities curve if a natural disaster creates a scarcity of a key resource needed to make a product. Explain why this happens.

Answer 1

The production possibilities curve will shift inward (or pivot inward toward the axis of the affected good), showing a lower maximum output for that product and fewer attainable combinations overall. This happens because the scarcity of a key input reduces the economy’s productive capacity for that good, so with the same resources you can produce less.