Production Possibility Frontiers

A Production possibility frontier, or a PPF shows the maximum combination of output that an economy can produce, using all available resources. It shows scarcity, choice and opportunity cost.

Figure one

• Point Y is unattainable as it is outside the PPF, if there was an increase in total resources or an improvement in technology the curve would move outward, making D attainable, shown in figure two. 
• Point X is inside the PPF due to either unemployed resources or an economy using its resources inefficiently.
• PPF'S show an opportunity cost so if you were producing products A and B at point B. You could reallocate your sources to either produce more of product A or B.  If you chose to produce more of good B, the opportunity cost is less of good A and vice versa.

Figure Two

• There can be an inward or an outward shift in the PPF as shown in figure two. A shift from AB to RS can be caused by a sudden decrease in resources, an example of how this can be bought about is a natural disaster.
• The shift from AB to PQ is due to an improvement of the technology available and therefore an increase in efficiency.