There are 2 goods being produced in an economy i.e. shirts and sandals. Now, due to advancement of technology, production of the sandals increased. Which of the following options holds true in regard to the statement?

Rotation of the PPC

The correct answer is option 3: Rotation of the PPC

• The Production Possibility Curve (PPC) shows the maximum possible output combinations of two goods using available resources and technology.

• When technology improves only for one good (in this case, sandals), the economy can now produce more sandals with the same resources.

• This causes the PPC to rotate outward from the sandals axis, while the shirts axis remains unchanged.

In the following graph sandals are denoted with good x and shirts are denoted as good y.

Why not the other options?

• Option 1 (Rightward shift in PPC) – This implies both goods can be produced more, which is incorrect here as only sandals see an increase.

• Option 2 (Leftward shift in PPC) – This would mean a reduction in production capacity, which is not the case.