Production Possibility Frontier ( PPF )

A PPF shows the utmost possible output combination of two goods or services an economy can attain when all resources are efficiently utilized.. If the economy is not producing the quantities indicate by the PPF, resources are being managed inefficiently and the production of society will decrease.

The PPF shows there are limits to production, so an economy, to achieve effectiveness, must choose what combination of goods and services can be produced.

In the above diagram, the PPF shows the combination of two goods X and Y. which is produced using the efficient resources. If we wish to produce more product Y, so we have to decrease product X to produce more product Y and vice-versa. Inner side points of PPF are achievable and outside the PPF points are impossible.

 

Written and explained by ( Scholar Aysha Nasim )

M.Phil Economics – Preston university