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Production Possibility Frontier
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Copyright - Ecotuts 2010
Project Head: Pradeepthi BommidalaGraphs and Figures Designed By: Govind Bommidala
Definition
Production possibility frontier is a curve showing the maximum combinations of goods or services that can be produced in given period with available resources.
Production possibility frontier can also be referred to as Production Possibility Curve (PPC), Production Possibility Boundary (PPB), Transformation Curve or Opportunity Cost Curve.
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Production Possibility Frontier
At point A, all of the resources are devoted to the production of
non-manufacturing goods.
At point D, all resources are devoted to the production of
manufactured goods.
At point E, the economy is not using it’s resources efficiently
and point F is unattainable with the available resources.
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C
B
F
E
o
A
DNo
n-M
anuf
actu
red
Good
sManufactured Goods
Copyright - Ecotuts 2010
Figure 1
Shifts in Production Possibility Frontier
O
B
Q
QP
P
A
P
Non-
Man
ufac
turing
Goo
ds
Manufacturing Goods
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The PPF shifts from PP to QQCopyright - Ecotuts 2010
Figure 2
Causes for shifts in PPF
there is an increase in the quantity of resources available for production. (Eg: Increase in the workforce or the number of new factories).
there is an increase in the quality of resources. (Eg: Educated workers, technological advancements etc.)
An increase in the productive potential of an economy is shown by a rightward shift on the production possibility frontier.
The PPF shifts rightwards when:
The PPF shifts leftwards when:
the economy loses it’s efficiency due to natural disasters or famines etc..
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Do not copy or reproduce the above material.
CREDITSProject head: Pradeepthi Bommidala
Graphs and models: Govindu Bommidala
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