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Technological progress 3. increase in physical capital or labour Select one: True! moves the economy down a given PPF. Inward Shift: If a PPF shifts inwards, it indicates that the economy is shrinking, resulting in non-optimal resource allocation and loss of productivity. 2. IGCSE Economics Money and Finance. If the total amount of production factors like labor or capital increases, then the economy is able to produce more goods at any point along the frontier. can have devastating effects on a country. An individual production shift in the PPF means that a change in technology or resources affects production of each product in different ways, creating a skewed shift. Other factors such as currency devaluation or technological and political innovation can also shift a nation's PPF inward. Lv 7. When the PPF curve moves inwards (inward shift) it suggests the economy is shrinking. Accordingly, the reduction in labor resources would cause the PPF to shift inward. Each point on the curve shows how much of each good will be produced when resources shift from making more of one good and less of the other. That would mean that some combinations of goods that were available are now out of reach. The manufacturing of most goods requires a mix of all four. BellerbysLondon TEACHER. In the case of a country, it is the factors of production (land, labor, capital, and enterprise) available to that country that typically apply limits to what can be achieved. This is caused improvement in technology and increased factors of production that are in favour of one commodity. Shifts in the PPF Curve So, now we can talk about shifts in the entire curve. False A mandatory early retirement age would make less labor resources available for production purposes. When the PPF curve moves outwards (outward shift), we can infer there has been growth in an economy. So far, we've talked about Econ Isle's possibilities up to its frontier, but the frontier line itself can shift. However, most economic contractions reflect not that less can be produced but that the economy has started operating below the frontier, as typically, both labour and physical capital are underemployed, remaining therefore idle. Figure 1 shows the inward shift of the PPF curve of … Inward Shift of Production Possibilities Frontier (PPF)? Advancement in technology and the allocation of resources. Shifts in PPFs The PPF represents the maximum amount of goods and services an economy can produce with its existing resources and at existing factor productivity. 1 Answer. Related Articles: The Production Possibilities Curve: Assumption, Uses or Application ; Assumptions Made while Drawing Production Possibility Curve ; Production. 42 terms. There are five significant factors that cause a shift in the demand curve: income, trends and tastes, prices of related goods, expectations as well as the size and composition of the population. Many countries have therefore witnessed an inward shift of their PPF, one close to the frontier of PPF to a new point inside the curve. For example: Steel was being used to produce the product, but now the supply of steel in the economy has reduced which has caused a reduction in overall production. An inward shift in the PPF means that the production of both goods decreases because of a change in resources or technology. It can also represent improved technology. Outward or inward shifts in the PPF can be caused mainly by changes in the total amount of available production factors or by advancements in technology. sensekonomikx. Two primary changes can cause the frontier to shift: a change in productive resources and technological change. 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