What makes the Production Possibility Frontier shift to the right?

The production possibility frontier is the reflection of the maximum productive potential of an economy. Any point on the curve shows a combination of two goods that an economy can produce given that all resources are fully and efficiently used. Movements along the curve show the opportunity cost of producing less of one good and more of the other; the more mobile resources are between the two goods the smaller the opportunity cost.Given the definition of the PPF a shift to the right ie an increase of the PPF is an expansion of the productive potential of the economy which in macro terms translates into long term economic growth. This could be attributed to the discovery of new natural resources, which increases capacity at current levels of productivity. It could also be caused by investment in human capital and development of new technology, which increases productivity in the economy and can speed up production without an expansion of natural resources. Nevertheless, all these causes only show results in the long run and cannot have a significant immediate effect.

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Answered by Vasiliki T. Economics tutor

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