hey everyone and welcome back to the channel today we're going to be reviewing one of the first topics you'll ever cover in your economic studies and that is the production possibilities curve in this video we will be reviewing five different scenarios which will cause the ppf to either shift pivot or both we will explain why each translation takes place and make sure that you understand everything there is to know about moving the ppf with that said let's get into it so the production possibilities curve also known as the production possibilities frontier or ppf for short is simply a graph with two goods one on each axis and this graph shows all of the different combinations of these two goods that an economy can make when using all of its factors of production efficiently now if you need a more in-depth refresher on what the ppf is then feel free to check out our other videos on the channel where we go more into depth on the topic in this video we have five scenarios which affect our production possibilities frontier for an economy with two goods let's call the good on the x-axis good x and the good on the y-axis good y the scenarios will progressively get more difficult as we go so stay tuned if you want an example of every type of movement that you can do now let's start with scenario number one improved technology increases the productivity of both sectors equally well we know from our previous video that an increase in productivity will shift the ppf to the right but what is the significance of mentioning that both sectors are impacted equally well in this case you can see that the y-intercept and the x-intercept have increased by the exact same amount there's no distortion in the ppf just a clean shift to the right this means that due to this technological advancement the economy can now increase production of both good x and good y simple enough perfect let's move on to scenario number two now scenario number two is that a drought negatively impacts both sectors equally well in this case a drought is clearly a negative shock and so the ppf is going to shift to the left once again we are told that both good y and good x sectors are impacted equally so you'll notice that both the x and the y intercepts have moved towards the origin by the exact same amount due to the drought the economy can now make less of both goods x and good y this is very similar to our first example except this time it's a negative shock ready for something a little bit more difficult awesome let's check out scenario number three an increase in education and training increases productivity in the good x sector only but we know that an increase in productivity moves the ppf to the right but it doesn't impact both sectors equally in fact the shock does not impact the good y sector at all in this case we see that the x-intercept moves to the right and the y-intercept doesn't change in economics this is called a pivot as only one intercept changes and therefore pivots around the other what this means is that the economy can now produce more of good x but it can't change the production of good y this is because the shock only affected the good x sector now let's move on to scenario number four a forest fire destroys resources used in the good y sector only well a forest fire is definitely a negative shock so the ppf is going to move to the left however the good x sector is not impacted by the shock only the good y sector so in this case we see that the y-intercept changes but the x-intercept remains the same and so we pivot once again what this means is that our economy can make less of good y but the exact same amount of good x as we could before the negative shock since only the good y sector is impacted finally let's move on to our hardest example scenario number five if you can fully understand this example then it's safe to say that you have no problem acing the ppf section of that next unit test or midterm scenario number five new labor laws negatively impact both sectors but the good x sector is hurt more than the good y sector so once again we are presented with a negative shock and therefore a leftward shift of the ppf curve and we know that it impacts both sectors but this time they aren't proportionately impacted we are told that the good x sector is hit harder than the good y sector and in this case both the y-intercept and the x-intercept will move closer to the origin but the x-intercept will move more why is that well if the good x industry is hurt more then due to this negative shock we will ultimately be able to produce less of both good y and good x but the reduction in how much of good x we can make will be even stronger than good y and so the intercept will move more as you can see this heavily distorts our ppf but at the end of the day when a negative shock occurs in the real world this is most likely to resemble what would actually happen in a too good economy so there we have it we've gone over five scenarios where shocks have impacted our production possibilities curve if you followed along through the entire video and everything makes sense to you perfect i anticipate you'll do very well on your next test if something is a little unclear i'd advise that you check out our other videos on the ppc but also drop a comment and i can definitely answer any questions that you may have directly if you're watching this right before a big test or an exam good luck i hope that you do well if you enjoyed this video and found it helpful let us know by liking the video subscribing to the channel and of course leave us a comment in the comment section below thanks for watching this video and we'll catch you in the next [Music] you