Question

Can a production possibility frontier ever shrink inwards?

Answer 1

Yes, The PPF curve can shrink towards the inwards direction. It depends upon the losses to the capital goods and labor force. For example, if a war destroys the infrastructure or factories and many people lose their lives, then resources and capabilities decrease and PPF curve shrinks in the inward direction. In another example, if there is lack of investment upon the capital goods and labor force are also stagnant over a period of time, then it also makes the PPF curve to shrink in inward direction.