Production Possibilities Model

Production Possibilities Curve /

Frontier
• The Production Possibilities Frontier (PPF):
a graph that shows the combinations of
two goods the economy can possibly produce given
the available resources and the available technology .
• The PPC illustrates the trade-offs facing an economy
producing two goods.
• A trade-off (or tradeoff) is a situational decision that
involves diminishing or losing one quality, quantity or in
return for gains in other aspects.
• In simple terms, a tradeoff is where one thing increases
and another must decrease.
PPC
• In this diagram AF is the production possibility
curve, also called or the production possibility
frontier, which shows the various combinations of
the two goods which the economy can produce
with a given amount of resources. The production
possibility curve is also called transformation curve,
because when we move from one position to
another, we are really transforming one good into
another by shifting resources from one use to
another.