How does production possibility curve shift?

 Shift in Production Possibility Curve...

The shift of production possibility curve upward and downward due to various reasons is called shift in production possibility curve. It’s of two types:-

A. Upward shift in PPC: The shift in PPC from its initial position to upward is called upward shift in PPC. It’s due to the following reasons:

1. Increase in capital: Capital is the major factor of production. If the stock of capital increases, the economy will be able to increase the production of both commodities and PPC will shift upward.

2. Increase in labour force: It is an another important factor of production. If there is increase in labour force and their efficiency output can be increased and PPC will shift upward to the right.

3. Technological development: When the economy makes progress in the development of technology, the economy will be able to produce more of both goods with the given and fixed amount of resources and the PPC will shift upward to the right.

B. Downward shift in PPC: If the PPC shifts to the left of this initial position then it’s called downward shift in PPC. It is due to mismanagement, overburden of labour force, inefficiency in production process, lack of capital application of unproductive technology etc.

The shift of PPC is presented in the following figure:




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