Economics – Production possibility curves | e-Consult

A PPC that is a straight line indicates that the economy is operating with constant opportunity costs. This means that the resources available for producing the two goods are perfectly adaptable between the production of the goods. For every unit of one good produced, the economy sacrifices a fixed amount of the other good. This typically occurs when resources are highly specialised and easily transferable.

Impact of rapid economic growth on the PPC: A period of rapid economic growth typically involves an increase in the availability of resources (e.g., investment in infrastructure, increased labour force) and/or technological advancements. This would cause the PPC to shift outwards. The economy can now produce more of both goods than it could previously. The new PPC would still be convex to the origin, reflecting increasing opportunity costs, but the overall level of production would be higher.

Impact on comparative advantages: Rapid economic growth can alter a country's comparative advantages. If the growth is driven by improvements in technology that are particularly beneficial for producing one good, the country's comparative advantage in that good will increase. The relative position of the PPC in relation to other countries' PPCs would change, potentially leading to changes in trade patterns. The country might become more competitive in the global market for the good where it has a comparative advantage.