Production possibility curve: Swivel
Channel: econom
Date: 2015-11-24

An improvement in the technique for producing blankets makes it possible to produce more blankets with the available factors of production.
According to our original production possibility curve it is possible to produce either 50 pillows or 5 blankets. An improvement in the technique of producing blankets implies that with this given resources it is possible to produce 8 blankets. The maximum potential output of blanket has increased from 5 to 8.
Since the technique and the resources available for the production of pillows are unchanged the maximum potential output of pillows remains at 50 pillows.
The production possibility curve therefore swivels.
At any point on the new production possibility curve, except the point indicating the maximum output of pillows (50 pillows), more pillows and blankets can be produced. This is indicated by points such as D and F.
An increase in the production techniques of one of the goods (blankets) not only make it possible to produce more of this good but also more of the other good (pillows) and economic growth occurs.