Question

If an economy produces computers and pizzas and a technological innovation makes the production of computers cheaper, we would expect the economy's production of pizzas to _______.

Answer 1

Pizza production expected to fall

Step-by-step explanation:

These two products refecting production possibilities of country can be viewed as - Market Supply Substitute Goods , Production Possibility Curve two goods .

• Considering them to be supply Substitutes : There is negative relationship between them. If profit of one product increases (analogous to its price fall) - i.e the case of cheap production due to technology improvement , the producer shifts resources from less profitable good to more profitable good . In this case , so it shifts from pizza to computers and the former's production will fall .

• Considering them to be PPC goods (curve reflecting maximum quantity of goods that can be produced by an economy - given resources & technology) :

Technology increase & cost fall of Computer would shift PPC computer curve axis to rotate outwards - reflecting more quantities of it can be produced .

But PPC is downward sloping - denoting two goods production inverse relationship given resources & technology .

So , increasing production of computers can imply fall in production of pizza in this case also