ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An economy’s leaders always want to move the production possibilities curve outward and to the right, and they can only do so with growth. The leaders must create more demand for either or both products. Only after that occurs can more resources be used to produce greater output.

Detailed explanation-2: -When the economy grows and all other things remain constant, we can produce more, so this will cause a shift in the production possibilities curve outward, or to the right.

Detailed explanation-3: -So if there is increase or decrease in the supply of the resources used for production, it is reflected in the amount of output. Therefore, the production possibility curve shifts to the right or to the left.

Detailed explanation-4: -What can cause a production possibilities curve to move to the right? A new invention lowers the cost of production. What is the purpose of a production possibilities graph? to show alternative ways to use an economy’s resources.

Detailed explanation-5: -A PPF will shift inwards when an economy has suffered a loss or exhaustion of some of its scarce resources. This reduces an economy’s productive potential.