The price for the capital good is determined at such point where quantity supplied and quantity demanded of the capital good equal. The equilibrium point is e. The capital good is subject to price ceiling so lower price P1 forces the market condition to supply less due to less incentive to earn profits but consumers demand more due to reduced price for capital good.

In the diagram for production possibility frontier, current production possibility is AB because this curve is operating the market by using current technology and resources on which points c, d and e are the attainable points. Future production possibility frontier is AB?. In the future, there is more chance of coming of new technologies and alternative ways to produce the consumer goods in the country because of higher demand at price set by the government.

Due to no price ceiling, producer would tend to produce both the goods consumer goods and capital goods so producers will devise new technologies in future to produce both the goods that will shift the production possibility frontier to the right from AB to A?B? whereas, at time of price ceiling, producer would be willing to produce only consumer goods in place of capital goods due to high profit associated with consumer goods than the capital goods. In the absence of price control, economy progresses at a rapid rate due to efficient use of the resources because of putting efforts by the producers in devising new technologies.

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