Authors libby rittenberg 92
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curve is illustrated in Figure 2.13 "Economic Growth and the Production
Possibilities Curve". In Panel (a), a point such as N is not attainable; it lies
outside the production possibilities curve. Growth shifts the curve
outward, as in Panel (b), making previously unattainable levels of
production possible.
Figure 2.13 Economic Growth and the Production Possibilities Curve
An economy capable of producing two goods, A and B, is initially
operating at point M on production possibilities curve OMR in Panel
(a). Given this production possibilities curve, the economy could not
produce a combination such as shown by point N, which lies outside
the curve. An increase in the factors of production available to the
economy would shift the curve outward to SNT, allowing the choice of
a point such as N, at which more of both goods will be produced.
The Sources of Economic Growth
Economic growth implies an outward shift in an economy’s production
possibilities curve. Recall that when we draw such a curve, we assume that
Attributed to Libby Rittenberg and Timothy Tregarthen
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