- Shift of the production possibility frontier
- A shift of the production possibility frontier is a move of the frontier, or of part of it, because the economy's resources or technology have changed.
- Movement along the production possibility frontier
- A movement along the production possibility frontier is a switch of the economy's existing resources from one good to the other, with the frontier unchanged.
Causes of a shift in the frontier
Can you name the four things that shift a production possibility frontier?
The first three move the frontier outwards, so more of both goods becomes possible. The fourth moves it inwards.
More resources means a larger stock of labour, land or capital, such as more workers or more factories, so the economy can make more of everything.
Can you think of an example?
Net migration adds people of working age to the labour force. With more workers the economy can produce more of both goods, and the whole frontier moves out.
Better resources are the same inputs made more productive, such as workers with more human capital, the skills and knowledge that make them productive.
Can you think of an example?
More school-leavers train as engineers and electricians. Each hour of their work now produces more, so the frontier shifts out without any extra workers.
Technology is all the advances that make existing machines and other inputs produce more, and at higher quality, as well as altogether new products.
Can you think of an example?
New software lets each office worker handle far more invoices and orders in a day, so the same people and computers produce more and the frontier moves out.
A loss of resources is a fall in the labour, land or capital an economy has, through war, natural disaster, emigration or a natural resource running out.
Can you think of an example?
In the Second World War much of Europe's physical capital, such as factories, roads and vehicles, was destroyed and millions of people died, so Europe's frontiers moved inwards.