ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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.

Detailed explanation-2: -If the production possibility frontier shifts to the right, this would show economic growth. Where there is an advancement of technology or increase in availability of resources or introduction of a production method with improved efficiency in respect to both the goods, then PPF will shift to the right, i.e. outwards.

Detailed explanation-3: -A production possibility frontier (PPF) illustrates the combinations of output of two products that a country can supply using all of their available factor inputs in an efficient way. One way the PPF can shift outwards is if there is an increase in the active labour supply.

Detailed explanation-4: -So if there is increase in the availability of the resources in the economy then automatically the overall output in the economy increases which shifts the PPC to the right.

Detailed explanation-5: -Over time, a growing economy will tend to shift the PPF outwards. The law of diminishing returns holds that as increments of additional resources are devoted to producing something, the marginal increase in output will become smaller and smaller.