The PPC or the Production Possibility Curve represents the output combinations of various goods using the best available technology that can be produced using all the relevant resources. When the curve shifts right it implies that there is an increase in the technology or the resources or both of them.
Why does PPC shift towards left?
The basic idea is that anything that causes economic output to increase or decrease will shift this curve. When the curve shifts outward, or to the right, that means output is increasing. When the curve shifts inward, or to the left, that means output is decreasing.
What does the production possibility curve reveal?
The production possibilities curve (PPC) is a graph that shows all of the different combinations of output that can be produced given current resources and technology. Sometimes called the production possibilities frontier (PPF), the PPC illustrates scarcity and tradeoffs.
What information can the production possibilities curve reveal?
A production possibilities curve shows the combinations of two goods an economy is capable of producing. The downward slope of the production possibilities curve is an implication of scarcity. The bowed-out shape of the production possibilities curve results from allocating resources based on comparative advantage.
What causes changes in the production possibilities curve?
Shifts in the production possibilities curve are caused by things that change the output of an economy, including advances in technology, changes in resources, more education or training (that’s what we call human capital) and changes in the labor force.
Why do leaders want to move the possibilities curve to the right?
An economy’s leaders always want to move the production possibilities curve outward and to the right, and can only do so with growth. They must create more demand for either or both products. Only after that occurs can more resources can be used to produce greater output.
Which is an example of a production possibility?
A production possibility can show the different choices that an economy faces. For example, when an economy produces on the PPF curve, increasing the output of goods will have an opportunity cost of fewer services. Moving from Point A to B will lead to an increase in services (21-27).
How is the production possibilities curve determined in a command economy?
In a command economy, planners decide the most efficient point on the curve. They are likely to consider how best to use labor so there is full employment. An economy’s leaders always want to move the production possibilities curve outward and to the right, and can only do so with growth.
