Explain the rotation PPF with the help of diagrams.
Resources are limited in any economy, and we cannot satisfy all our wants. Since we cannot have everything we want, we have to make choices among alternate goods and services that will best satisfy our wants. PPF is an economic model used to illustrate how people and nations decide what goods to produce, how much to produce, and for whom to produce. Production Possibility Frontier is the graphical representation of possible combinations of two goods, let’s say car and computer, that can be produced with given resources and technology.
Shift in PPF:
The PPF can shift either towards the right or towards left when there is a change in resources or technology concerning both the goods.
Rightward Shift in PPF:
When there is the advancement of technology or/and an increase in the availability of resources with respect to both the goods, then PPF will shift to the right.
Leftward Shift in PPF:
PPF will shift towards left, when there is a technological degradation and/or decrease in resources with respect to both the goods.
Rotation of PPF:
This happens when there is a change in production capacity with respect to only one good, I .e.resources / technology.
Rotation for commodity on the X-axis:
When there is a technological improvement or an increase in resources for the production of the commodity on the X-axis (say, computers), then PPF will rotate on the X-axis.
Rotation for commodity on the Y-axis:
A technological improvement or an increase in resources for the production of the commodity on the Y-axis (say, cars), will rotate the PPF on Y-axis.
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