What factors lead to a shift of production possibility curve?
Answers
The production possibilities curve shows all possible combinations of how two goods can be produced given the constraints, including the fact that there are scarce resources.
The factors leading to shifts in the PPC include:
1. Changes in technology: If there are positive technological changes then PPC curve shifts outwards.
2. Changes in resources: If there is increase in resources then PPC curve shifts outwards and if there is decrease in resources the PPC curve shifts inwards.
3. Change in human capital : If the workforce is trained and educated more this would increase human capital therefore the curve will shift outwards and vice versa.
4. Changes in the labor force: If the labor force is increased than curve will shift outward and if labor force is decreased then curve will shift inwards.
Answer:
1. Changes in technology: If there are positive technological changes then PPC curve shifts outwards. 2. Changes in resources: If there is increase in resources then PPC curve shifts outwards and if there is decrease in resources the PPC curve shifts inwards