Production Possibilities Frontier (PPF)

Definition

• Graph showing possible combinations of production in an economy
• Assumes economy produces only two goods for simplicity

Example

• Economy producing cement and televisions
• Y-axis: Tons of cement
• X-axis: Number of televisions
• The PPF curve represents the limit of total production

Key Points on the Curve

• Point A:
  • All resources used for cement production
  • 3000 tons of cement and 0 televisions
• Point B:
  • All resources used for television production
  • 1000 televisions and 0 tons of cement
• Point C:
  • Efficient production
  • 1700 tons of cement and 600 televisions

Inefficient and Impossible Points

• Point D:
  • Inefficient production
  • 300 tons of cement and 150 televisions
  • Could be due to lack of labor or machinery
• Point E:
  • Outside the curve; impossible with current resources
  • Would require technological advancements or more resources to achieve

Expansion of PPF

• With new technology (e.g., more advanced machinery)
• PPF shifts outward
• New possible production: 2200 tons of cement and 200 televisions

Summary of PPF Curve

• Represents various production alternatives
• Points on the curve: Efficient production
• Points inside the curve: Inefficient production
• Points outside the curve: Impossible production with current resources