Shifts in the Production Possibilities Curve
In the example of Country A’s PPC, we presented the idea of two simultaneously produced products. The border of the graph reflects the existing production capacity of Country A. However, as time passes, the country’s manufacturing capability can either improve or deteriorate. A change in capabilities also causes a change in the quantity of products that the country can simultaneously produce.
Any change in manufacturing capability generates a new Production Possibilities Curve for the country.
When a new PPC rises above the preexisting one (denoting an increase in manufacturing capability), we say the curve has shifted upwards. If a new PPC descends below the preexisting one (denoting a decrease in manufacturing capability), we say the curve has shifted downwards. We will examine several examples of increasing and decreasing manufacturing capability.