How does increasing or decreasing the quantity of capital goods produced this period affect next period's production possibilities curve and why?

The only thing I can think of is that if more products are produced this period, less can be produced next period because their are less resources used and if less goods are produced this period, more can be produced next period because less resources have been used. So, if more goods are produced the production possibilities curve moves to the left anf if less goods are produced the curve moves to the right. I do not know why though...

Is this right? I am slightly confused with this whole concept...PLEASE HELP!

Hummmm. In a world of fixed, non-renewable (natural) resources, I would agree with your answer. However, I think you may have over-analyzed this problem/question. Further, your original question asked about capital goods.

In general, one makes capital goods today so that one can be more productive tomorrow. Increasing the quantity of capital goods should shift the PPF outward.

(Consider an example of a primative hunting society. With its current capital stock of spears only, the tribe can kill 100 deers per year. However, instead of hunting, some tribe members work on creating bows and arrows (creation of capital goods). How many deer can the tribe expect in the following period with bows and arrows?

Your understanding is partially correct, but there are a few additional factors to consider when analyzing the effect of changing the quantity of capital goods produced in one period on next period's production possibilities curve (PPC).

First, let's define what capital goods are. Capital goods are defined as goods that are used to produce other goods and services. Examples of capital goods include machinery, tools, buildings, and infrastructure. These goods contribute to future production capacity.

Now, let's consider the two scenarios you mentioned:

1. Increasing the quantity of capital goods produced this period:
When more capital goods are produced in the current period, it means that more resources are allocated towards the production of capital goods rather than consumer goods. This can lead to an increase in future production capacity, as more tools, machinery, or infrastructure become available to produce goods and services. As a result, the production possibilities curve for the next period shifts outward or to the right. This indicates an increase in the potential maximum output of goods and services.

2. Decreasing the quantity of capital goods produced this period:
When fewer capital goods are produced in the current period, it means that fewer resources are allocated towards the production of capital goods. This can lead to a decrease in future production capacity as there are fewer tools, machinery, or infrastructure available for production. In this case, the production possibilities curve for the next period shifts inward or to the left. This indicates a decrease in the potential maximum output of goods and services.

It is important to note that the impact of changing the quantity of capital goods produced on future production possibilities is not solely determined by the immediate allocation of resources. Other factors that influence future production capacity include technological advancements, changes in the labor force size or skill level, availability of natural resources, and changes in preferences or demands.

In summary, producing more capital goods in the current period can increase future production capacity, shifting the PPC outward, while producing fewer capital goods can decrease future production capacity, shifting the PPC inward.