Figure 3 here

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Figure 3 - A Shift in the Production Possibilities Frontier

A technological advance in the computer industry enables the economy to produce more computers for any given number of cars.

The production possibilities frontier shifts outward, from inner curve to outer curve.

When the economy moves from point A to point G the production of both cars and computers increases.

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A production possibilities frontier graph shows the trade-off between the outputs of different goods at a given time and technology.

But the trade-off can change over time, per Figure 3.

Suppose a technological advance in the computer industry raises the number of computers a worker can produce per week.

This advance expands the economy’s set of opportunities, moving the economy from the blue inner curve to the red outer curve.

When producing 650 cars before could only have 2100 computers but now can have 2300.

At any number of cars except 1000, the economy now can make more computers.

This economic growth results from improved productivity due to improved technology.

When the economy moves from point A to point G

· more computers are produced, now 2300 up from 2200

· more cars are produced, 650 up from 600

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The production possibilities frontier illustrates several important economics ideas

· scarcity

· efficiency

· trade-offs

· opportunity cost

· economic growth

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technological advance

gijutsu shinpo

技術進歩