Why must a country give up consumer goods in order to produce more capital goods?
A.This is best understood by looking at a Production Possibilities Frontier. If a country is producing at any point along its production possibilities curve X1 to X2 on such as points A or B, it is using all of its resources efficiently and completely. In other words there are no idle machines, no unemployed labor, no empty factories. Suppose that this country is currently producing at point B on curve X1 to X2. If this country wanted to reach point C, lying along curve Y1 to Y2 which is outside its current production possibilities, it would need to either create new technology, develop new resources or engage in international trade. If the country chooses to develop new resources it could move to point A. In doing so the country would have to move labor, machines and factories from the production of consumer goods into the production of capital goods (new resources). Thus the country would have to give up the current level of production of consumer goods in order to produce more capit
