In: Economics
Ans 4. Production possibility Frontier shows those different
combinations of two different commodities which a producer is able
to produce with the help of an optimum utilisation of the given
resources.
Production possibility Frontier PPF is concave to the origin
because of increasing marginal opportunity cost.
Marginal opportunity cost is the rate of sacrifice of one good in
comparison to the production of another good.
Points on PPC or PPF shows the full and optimum utilisation of
resources.
Point inside the PPF shows underutilization of the resources.
There are only two possible shifts in the PPF: one is a rightward
shift that is also called an upward shift of the PPF and another is
a left shift that is also called a downward shift of the PPF.
The rightward shift or the upward shift of the PPF shows
Improvement in technology
Growth of the economy
Increasing the resources
Progress in the effectiveness and efficiency of the factors.
So in this case the upward shift means there is change in both the
goods. i.e. capital goods and the consumers goods.
Because a rightward shift means overall increase in the production
of both the goods.
In this case both saving and consumption will increase.