Production Possibility Frontier

Production Possibility Frontier.

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  • Created on: 29-04-12 11:40
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Production Possibility Frontier
A production Possibility Frontier (PPF) shows the different combinations of economic goods which
an economy is able to produce if all resources are fully and efficiently employed.
Full Capacity
The PPF shows the maximum level of output of two goods that an economy can achieve given the
level of technology available. So, if an economy at located any point on the PPF then the economy is
functioning at full capacity. The economy cannot reach combinations outside the PPF. Also if the it is
located inside the PPF, this shows that the economy is not working at full capacity and not efficiently
using all its resources.
Linear and Concave PPFs
A typical PPF is bowed to the origin and shows that, as more of one type of good is produced, an
increasing amount of the other type of good is foregone. The opportunity cost rises. This is because
not all resources are as efficient as each other in the production of both types of goods.
Shifts in the production possibility frontier
A country's PPF may increase over time, which is shown in an outward shift. This represents economic
growth and there are several causes: for example, an increase in the quality and quantity of
resources (the quality of workers may of increased by education and training); or an increase in
investment in new technology.
Occasionally, the PPF may shift inwards towards the origin, indicating a decrease in the potential
output of the economy. This could be caused by war or a natural disaster where many resources are
It is also possible for the PPF to stretch along one axis. This would occur if a new technology
increased the production of one good, without effecting the potential production of another.


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