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Movement and Shift in Production Possibility Curve

Question

Show the difference between a movement along, and a shift in, a production possibility curve. Explain what might cause each to occur. Use diagrams to support your answer. [8]

Category:

Microeconomics

[CIE AS level November 2017]

Preview Answer


Step ➊ : Define PPC in the introduction.

A production possibility curve (PPC) is a simple representation of the maximum level of output that an economy can achieve when using its existing resources in full. The movement along with the PPC and a shift in the PPC are caused by different factors and have different effects.


Step ➋ : Explain the difference between a movement along, and a shift in, a production possibility curve.

The difference between a movement and a shift in the production possibility curve is as follows :

➤ 2.1 When there is a movement in the production possibility curve, a country has to sacrifice some of the production of a good (e.g. manufactured good) in order to produce more of another good (e.g. agricultural goods). However, when there is a shift in the production possibility curve the economy is able to produce more (or less) of both goods (e.g. more or less of both agricultural and manufactured products).

➤ 2.2 A movement in the production possibility curve is caused by the decision to change the composition of goods produced whereas a shift in the production possibility curve is caused by a change in the factors available to an economy or a change in technology.

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