Best Uses:

 Opportunity cost:scarcity + choice

 Economic / allocative efficiency: 1.1 + 1.5
ED 3: PPF
 Unemployed resources in an economy 2.3
 Economic efficiency of a DC and an LDC 4.2
 Economic development 4.1
 Economic growth 2.1

Production Possibilities Frontier (PPF)

Production Possibilities Frontier

1. PPF has multiple applications to the course:

 Section 1: Can be used to illustrate scarcity, choice and the idea of limited resources and
therefore the need for effective resource allocation. It can clearly show allocative
(in)efficiency. It can also be used to illustrate the concept of opportunity cost e.g. the
opportunity cost of is equal to
 Section 2: Here it can be used to contrast allocative efficiency
with productive efficiency illustrated on an average total cost curve.
 Section 3: PPF could be used to show unemployed factors of production in an economy
 Section 4: PPF is a useful diagram to compare the economic efficiency of a DC and an
LDC. Also it can be used to show economic development when luxury goods are indicated
on the Y axis and essential goods on the X axis. Producing more essential goods is likely to
benefit a greater proportion of the population than producing mainly luxury goods that only
higher income earners can afford.
 Long run growth prospects can be shown with . If the country can increase the quantity of
land, labour and capital and /or increase the productivity of the factors of production then
the PPF can shift outward. Note: Actual output vs potential.