Clothing. In Figure 2.3. we are not concerned with the combination of goods produced (a microeconomic issue), but with the issue whether

In Figure 2.3. we are not concerned with the combination of goods produced (a microeconomic issue), but with the issue whether

the total amount produced is as much as it could be (a macroeconomic issue).

The production possibilities of a nation are likely to increase over time. For example, investment in a new plant and machinery will increase the stock of capital, new raw materials may be discovered; technological advances are likely to take place. Labour is likely to become more productive through education and training. This growth in potential output is illustrated by an outward shift in the production possibility curve. This will allow actual output to increase: for example from point x to point x¹ (Figure 2.4)

Figure 2.4 Shifts in the PPC from now to 5 years later.

Food

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X

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