1.8 : Rotations in PPF

The rotation of the Production Possibility Frontier (PPF) refers to the movement of the curve, either inward or outward. It indicates changes in the economy's productive capacity or efficiency over time.

The Production Possibility Frontier (PPF) rotations occur due to changes in available resources, technological advancements, or shifts in the economy's productive capacity. When resources are reallocated more efficiently, or new technologies are adopted, the economy can produce more goods and services with the same inputs, causing the PPF to rotate outward. This outward shift reflects an increase in the economy's potential output and indicates economic growth.

Conversely, if there is a decrease in resources or technological regressions, the PPF may rotate inward, reducing the economy's productive capacity and potential output. Additionally, changes in the composition of goods and services demanded by consumers can also lead to rotations of the PPF.

Understanding the meaning of the rotation of the PPF is essential for economists, policymakers, and businesses. It helps assess the economy's growth prospects, allocate resources efficiently, and make informed decisions regarding production and investment strategies.