PRODUCTION POSSIBILITIES FRONTIER

● Society’s technical possibilities

● Frontier that depicts society’s menu of choices
● Shows what society can produce, not should
● Maximum amounts of production of two goods that society can obtain
● Given (cet.par.)
○ Technology
○ Land (L)
○ Capital (K)
○ Labor (N)
○ Technological recipe
● Inputs
○ Factors of production
○ Land, capital, and labor
○ Given current technology to produce outputs
● Outputs
○ Goods and services resulting from the production process that can be consumer
or saved (used in later production)
● Axes of PPF
○ The two goods
● Point of Production Efficiency
○ On the line
● Point of Inefficiency
○ Inside the curve
○ Some resources aren’t utilized
● Impossible point
○ Outside the curve
○ Not attainable given the resources and technology
●
POSSIBILI BUTTER GUNS
TIES

A 0 15

B 1 14

C 2 12

D 3 9

E 4 5

F 5 0

U 2 6

I 4 9
● Rate of sacrifice
○ Opportunity cost or trade-off
● Negative slope
 ○ Different proportion or intensity
● Shape
○ Bowed out or concave due to increasing relative costs
○ Two goods may have different resource intensities in producing them
○ If straight, constant relative costs
● Shift
○ Move along the curve if no change
○ If cet.par. Changes, go out of the curve
○ Malthusian Doctrine
■ Economics is a dismal science
■ Did not foresee industrial revolution
○ Economic growth
■ Shifts PPF outward

○ Tiger Economies
■ Increase in resources rather than increase in economy
■