Production Possibility Frontier

A production possibility Frontier shows how much an economy can produce given existing resources.

A production possibility can show the difference choices that an economy faces. For example, when producing on the PPF curve, increasing output of goods will have an opportunity cost of less services.

Diagram of Production Possibility Frontier

ppf

Moving from Point A to B will lead to an increase in servics (22-25). But, the opportunity cost is that output of goods falls from 15 to 11.

At point C, the economy is inefficient. We can increase both goods and services without any opportunity cost.

Economic Growth

If there is an increase in land, labour or capital or an increase in the productivity of these factors, then the PPF curve can shift outwards enabling a better trade off.

Different PPF Curves

ppf

This shows a trade off between working and hours spent in leisure.