From a macroeconomics perspective, Production Possibility Frontier (PPF) in figure 1 is also known as Production Possibility Curve or Boundary, and Transformation Curve which illustrates the production possibilities available to a country or economy during a given period for comprehensive categories of output based on assumptions, representing numerous economic concepts, such as scarcity of resources, opportunity cost, productive efficiency and economics of scale. However, there will be shifts in a country’s PPF if these assumptions including fixed resources, unemployed or underemployed resources and technology are changed due to some factors. Figure 1
Conditions of an inward shift (Figure 2)
A country’s PPF will shift to the left where production potential will decline if economy fails to invest, resources run because of erosion of infrastructure and disasters. Figure 2
Erosion of infrastructure
If there is erosion of infrastructure while the level of land, labor and technology remained the same, work efficiency will be decreased leading to underemployed resources. The lousy infrastructure from good to bad includes roads, broken traffic lights, congestion in cities and capital goods. For instance, the awful roads in India have resulted in long-distance trucks average only about 20kph where the efficiencies are reduced causing production being declined, especially distribution and express businesses (The Economist, 2010). The case shows a nation’s production will drop where PPF shifts to the left because of erosion of infrastructure affecting adversely productivity as a bottleneck to economic growth.
Disasters
If there are disasters, the production will decline contributing to PPF’s inward shift. A case is the Second World War caused a 49.4 percent decrease in Japan GDP during the period (Ronald, Kevin H., 2009). The main reason is a shortage of