![]() As consumers’ wants change over time, the PPF shifts to adjust for those changes. ![]() For example, if the price of a good increases, producers’ incentive to produce that good will decrease and shift the curve inwards.įinally, changes in consumer preferences can also affect the PPF. Third, changes in the prices of goods and services can cause the curve to shift. An increase in resource availability will cause the curve to move outwards, while a decrease in resource availability will cause it to move inwards. Second, changes in available resources influence how much good producers can make and consequently shift the production possibilities curve. It can be shifted by four major factors: changes in technology, changes in resources, changes in prices, and changes in preferences.įirst, technological advances can lead to an outward shift of the PPC, enabling producers to produce more with the same resources. The four factors that shift the production possibilities curve ![]() These assumptions allow economists to predict how production possibilities will change in different scenarios. Production Possibilities Curves assume that only two goods or services represent the whole market. Production Possibilities Curves assume that all resources available are fully employed and none are left idle. 3rd assumption – Full employment of resources Production Possibilities Curves assume that all resources available remain unchanged and cannot be increased or decreased with more investment. It assumes that the technology used to produce a good or service remains the same and does not improve over time. The four assumptions of a production possibilities curveįour key assumptions were made as follows: 1st assumption – Constant technology
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