What is the PPF curve and what would cause it to shift?
The PPF (Production Possibility Frontier) curve demonstrates the maximum combination of two goods that an economy can produce simultaneously, given that all resources are used fully and efficiently.
(I would use a whiteboard feature to draw the PPF curve).
At any point on the curve, all resources are fixed. Therefore to increase the production of x1 I would have to decrease the production of x2, and vice versa. This movement along the curve demonstrates the opportunity cost as I would have to forgo 'y' amount of units of x2 in order to produce more units of x1.
Once resources are no longer fixed and have either expanded or contracted, the PPF could either shift to the right or shift to the left. For example, if there is an expansion of the production potential, such as a discovery of new natural resources or a technological advancement, then the PPF would shift to the right because the economy has increased its capacity of producing more with the increase in its resource input.
