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A production possibility frontier (PPF) shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed
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Output of capital goods
Output of consumer
goods
A
B
C
X
D
A PPF shows the different combinations of goods and services that can be produced with a given amount of resources in their most efficient wayAny point inside the curve – suggests resources are not being utilised efficientlyAny point outside the curve – not attainable with the current level of resources
Output of Capital Goods
Output of Consumer
Goods
160
100
60 90
A
B
1000
In this diagram, the opportunity cost of producing 100 units of consumer goods is the choice of to giving up 10 units of capital goods
Output of Capital Goods
Output of Consumer
Goods
160
100
60 90
A
B
1000
C
PPF1 PPF2
Output of Good B
Output of Good A
•A straight line PPF shows a constant opportunity cost between two products•Increasing output of good B from 60 to 90 units implies giving up 90 units of good A•The marginal opportunity cost for each extra unit of good B is 30 units of Good A
A
B
200
160
60 90
