PPC when every factor becomes three times as efficient

The PPC before the change. With rice on the x-axis and cars on the y-axis, the production possibility curve (PPC) shows the largest output of cars the economy can make for each output of rice (and the other way round) when all its resources are fully and efficiently used. The curve is drawn for a given stock of resources and a given state of technology; if either changes, the curve itself moves.

What the change does. If factor inputs become three times as efficient as before, every unit of labour, land and capital now yields three times the output it did, and this holds in the rice fields and in the car factories alike. Nothing has been taken from either industry; the same resources simply produce more.

• If all resources go to rice, the economy now grows three times as much rice: the rice intercept moves out to three times its old distance from the origin.
• If all resources go to cars, it now makes three times as many cars: the car intercept also triples.
• For any division of resources between the two industries, both outputs triple, so every point of the old PPC moves out along a ray from the origin to three times its old distance.

The new PPC. The PPC shifts outward on both axes, to a curve three times as far from the origin at every point, keeping its bowed-out shape. Combinations that lay outside the old curve, and could not be produced, are now attainable. Because both outputs have tripled in the same proportion, the trade-off between rice and cars along any ray is the same as before.

Conclusion. A rise in the efficiency of all inputs is growth in the economy's productive capacity: the whole PPC shifts outward, the rice and car intercepts each triple, and the economy can have more of both goods.