Possibilities The Production Possibilities Frontier
• The production possibilities frontier, PPF ,is a
graph that shows the combinations of output that
the economy can possibly produce given the
available factors of production and the available
• It shows the best an economy can do if it uses all
its resources efficiently, given the current
• NOTE: the PPF is often called a production
possibilities boundary, PPB. Example: Macland
• Consider the economy of Macland. It produces
only 2 goods: computers and cars.
• Macland’s technology is given (it is what it is).
• Its resources are fixed.
• The following table shows combinations of
computers and cars Macland can produce if it
uses all its resources, given the current
technology: COMPUTERS and CARS
A 3000 0
B 2200 600
C 2000 700
D 0 1000
Note that this is only a partial table.
Let’s graph these combinations: PPF for Macland
600 700 1000 Cars PPF for Macland
600 700 1000 Cars Computers
A H Unattainable
1200 K Frontier, PPF
400 600 700 1000 Cars • Points A, B, C and D on the diagram are
productively efficient – to produce these combos
all resources are used, given the technology.
• Point H lies outside the PPF – it is unattainable.
There are not enough resources to produce that
combo of goods, or the technology is not good
enough or possibly both. • Point K lies inside the PPF. Macland can
produce that combo, but it can produce more of
one or the other or both, given the technology
and available resources.
• Point K is feasible, but not efficient. • Every point on the PPF is productively efficient.
• However, you could be on the PPF but producing
a combination of goods that society doesn’t want
– i.e., the wrong combination.
• You would be producing at a point that is
• Efficiency, then, includes productive efficiency
(on the PPF) and social efficiency (producing the
combo of goods that society wants). • Every choice along the PPF involves a trade-off.
• We have to give up some computers to get more
cars and vice versa.
• The PPF illustrates opportunity costs – how
much we have to give up of one good to get more
of the other. PPF for Macland
200 2200 C