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Production–possibility frontier. In microeconomics, a production–possibility frontier ( PPF ), production possibility curve ( PPC ), or production possibility boundary ( PPB) is a graphical representation showing all the possible options of output for two goods that can be produced using all factors of production, where the given resources ...
The production possibilities frontier (PPF) for guns versus butter. Points like X that are outside the PPF are impossible to achieve. Points such as B, C, and D illustrate the trade-off between guns and butter: at these levels of production, producing more of one requires producing less of the other. Points located along the PPF curve represent ...
In this case the law also applies to societies – the opportunity cost of producing a single unit of a good generally increases as a society attempts to produce more of that good. This explains the bowed-out shape of the production possibilities frontier.
Figure 6: Production possibilities set in the Robinson Crusoe economy with two commodities. The boundary of the production possibilities set is known as the production-possibility frontier (PPF). This curve measures the feasible outputs that Crusoe can produce, with a fixed technological constraint and given amount of resources.
Productive inefficiency, with the economy operating below its production possibilities frontier, can occur because the productive inputs physical capital and labor are underutilized—that is, some capital or labor is left sitting idle—or because these inputs are allocated in inappropriate combinations to the different industries that use them.
The original H–O model assumed that the only difference between countries was the relative abundances of labour and capital. The original Heckscher–Ohlin model contained two countries, and had two commodities that could be produced. Since there are two (homogeneous) factors of production this model is sometimes called the "2×2×2 model".
In welfare economics, a utility–possibility frontier (or utility possibilities curve ), is a widely used concept analogous to the better-known production–possibility frontier. The graph shows the maximum amount of one person's utility given each level of utility attained by all others in society. [1] The utility–possibility frontier (UPF ...
Point C is not on the Pareto frontier because it is dominated by both point A and point B. Points A and B are not strictly dominated by any other, and hence lie on the frontier. A production-possibility frontier. The red line is an example of a Pareto-efficient frontier, where the frontier and the area left and below it are a continuous set of ...