Question
Identify the change (shift or rotation) in PPC as shown in the image given above and state its causes.
Identify the change (shift or rotation) in PPC as shown in the image given above and state its causes.
✓
Answer
The above image shows shift in PPC to the right. PPC (production possibility curve) is a curve showing different possible combinations of a set of two goods which can be produced with the given resources and given technology.
PPC shifts to the right due to the following reasons:
(i) Growth of Resources: Growth of resources would lead to growth of potential output, we can produce more of both the goods. Accordingly, PPC shifts to the right (from ab to a,b, as shown in the above diagram).
(ii) Technological Advancement: Technological advancement shifts the PPC to the right (from ab to a,b,), because better technology means more can be produced with the given resources.
PPC shifts to the right due to the following reasons:
(i) Growth of Resources: Growth of resources would lead to growth of potential output, we can produce more of both the goods. Accordingly, PPC shifts to the right (from ab to a,b, as shown in the above diagram).
(ii) Technological Advancement: Technological advancement shifts the PPC to the right (from ab to a,b,), because better technology means more can be produced with the given resources.
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