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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.
Suppose production occurs initially on the production possibility frontier (PPF) at point A. Suppose there is an increase in the labour endowment. This will cause an outward shift in the labour constraint. The PPF and thus production will shift to point B. Production of clothing, the labour-intensive good, will rise from C 1 to C 2.
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.
Pareto was hampered by not having a concept of the production–possibility frontier, whose development was due partly to his collaborator Enrico Barone. His own 'indifference curves for obstacles' seem to have been a false path. Shortly after stating the first fundamental theorem, Pareto asks a question about distribution:
2×2×2 model. 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 ...
In microeconomic theory, productive efficiency (or production efficiency) is a situation in which the economy or an economic system (e.g., bank, hospital, industry, country) operating within the constraints of current industrial technology cannot increase production of one good without sacrificing production of another good. [1]