PPCs+-+Showing+Economic+Growth

Production Possiblities Curves-Economic Growth A Production possiblity curve shows an economy's maximum (frontier), inattainable (to the right of the curve, outside the curve), and attainable but not proficient (inside or left of curve) production points. In other words, it shows how much of two separate entities can be produced assuming that the quantity and quality of resources and present technology is held constant. It is only when these supposedly "constant" variables begin to change, that a shift in the PPC, or economic growth occurs. One variable responsible for the outward shift, or overall increasing proficiency in the economy is an increase in quantity, quality, or both of resources. If more of a resource suddenly becomes available in the economic market, it will provide for the greater production and thus the increased proficiency of producing said product. Similarly, if a new, better resource becomes available, be it cheaper or more abundant, once again the economy's ability to produce a given product will increase and therefore the PPC will shift to the right. Also, advances in technology can lead to economic growth and a shifting PPC. A technological advance in the production of a certain product will not only save time and labor put into creating the product, but will allow a greater amount of total product to be produced in the same time frame. Thus, due to both resource and technological improvement, economic growth occurs.

This picture accurately depicts Economic Growth on a Production Possiblity Curve. Because the quantity/quality of resources or technology has improved the entire PPC has shifted from PP1 to PP2. Clearly, such improvements provide for a greater quantity of both capital AND consumer goods.

media type="youtube" key="c24MBi26tgQ&hl=en&fs=1" height="344" width="425" The idea of economic growth is explained well in this video. Jump to about 2 minutes in in order to view key information. [|University of Phoenix: Economic Growth] [|Microeconomics: Production Possibility Frontier] [|Encyclonomic Web Pedia: Production Possibilty Curves]

Which event would allow for the increase in production of both cars and computers (economic growth)? A. the price of motorcycles, a substitute for cars, increases B. An influx of Asian immigrants puts nearly 2,000,000 additional workers in factories C. The price of Gasoline, a complementary good, skyrockets D. computers are deemed obsolete due to the production of the widgrin

Correct answer: B, all other possible answers are elements of fluctuating demand, not economic growth.