Production Possibility Frontier (PPF)
This note will break down the Production Possibility Frontier ✨ in the most basic form possible.
Author:Krish Beachoo
Edu Level: Unit1
Date: Mar 31 2026 - 9:00 AM
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Production Possibility Frontier (PPF) or Production Possibility Curve (PPC)
What is a PPF/PPC?
This is a graphical way of showing the maximum possible combinations of two goods, that is good X and good Y, that can be produced when all available resources are efficiently employed at a given level of technology.
What a PPF/PPC Looks like
Capital Goods are goods used to produce other goods. Examples: Machinery & Equipment
Consumer Goods are goods for final consumption. Examples: Juice & Food
Assumptions of PPF/PPC
- It is assumed that all resources such as land, labour, capital and entrepreneur are fixed.
- Technology is fixed or given.
- It is assumed that only two (2) goods are produced. Example; Good X and Good Y or Consumer Goods and Capital Goods.
Shifts of the PPC
Factors Causing Shifts
There are 3 Factors that cause a shift of the PPC
- Technology
- Economic growth
- Resources
(i) Outward Shifts of the PPC
An improvement in technology, an increase in resources and economic growth will cause the PPC to shift outward from $AB$ to $A_1B_1$ and make it impossible to have more of both commodities being produced.
(ii) Inward Shifts of the PPC
There is an increase in the production of agricultural goods due to an improvement in the technology used to produce agricultural goods.
Pivot of the PPC
(i) Pivot Type 1
There is an increase in the production of Agricultural Goods due to an improvement in the technology used to produce agricultural goods.
(ii) Pivot Type 2
There is an increase in the production of manufacturing goods due to an improvement in the technology to produce manufacturing goods.
Question
CORRECT ANSWER:
(i) A B D F
(ii) G E C
(iii) G E C
(iv) A B D F
(v) A B
(vi) D F
Which of the following Points Indicates:
(i) Attainable Combinations
(ii) Unattainable Combinations
(iii) Scarcity
(iv) Choice
(v) Efficiency
(vi) Inefficiency
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