Production Possibilities Frontier

Production possibilities frontier (PPF)

• This is a graph that shows combinations of output that the economy may produce given the available factors of production and production technology.
  • With the resources it has, the economy can produce at any point on or inside the PPF, but it will not produce at points outside the frontier

• The economy can produce any combination on or inside the frontier
  • Points outside the frontier are not feasible due to the economy’s resources

• Points on the PPF represent efficient levels of production.
  • Inside the PPF is considered inefficient outcome.
    • The source of inefficiency can be due to widespread unemployment

• A technological advance can cause the PPF to shift outward.

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