1. Production Possibility Frontier
Economics
Courtesy of Mr. Elliott
Lakewood High School

2. Production Possibility Frontier
Every country or economy has a finite amount of the factors of production:
Land
Labor
Capital
Entrepreneurial Ability
Thus what can be produced is limited, & choices must be made!
A PPF model illustrates the choices for an economy

3. The PPF Curve/Graph First we assume that the economy
has only two products it can produce.
Each product is placed on an axis.
Burritos
Engines

4. The PPF Curve/Graph Next, we determine how much of
one good could be produced if all
the factors of production were
dedicated to producing just one of
the goods/services.
110
Burritos
For our model let’s assume we could
produce 110 burritos if we made 0
engines.
And we could produce 14
engines if we produced 0 burritos 14
Engines

5. The PPF Curve/Graph Now let’s add a few more points to our graph. 110
If we were to produce100 burritos,
then we would have resources to
produce 4 engines.
100
Burritos
If we produced only 60 burritos,
then we could use those resources
to produce 11 engines. 60 30
And if we produced only 30 burritos,
then we could produce 13 engines. 4 11 13 14
Engines

6. The PPF Curve/Graph The line developed by joining
the production possibilities represents
the maximum production for this
economy given its current factors of
production and technology.
110
100
Burritos 60 30 4 11 13 14
Engines

7. What the PPF tells us Scarcity Trade-offs Opportunity Costs B C K 110
100
At a Opportunity Cost
of 40 Burritos
Burritos C
We gain a total of 7 new
engines produced. But they
have a cost, an opportunity cost,
of 40 Burritos.
Let’s say we want to produce
more engines (moving to point
“C” and that we are currently at
point “B”. 60 30
7 Engines Gained
Point “K” is beyond the
production possibilities of
this economy given its current
resources and technology. 4 11 13 14
Engines

8. What the PPF tells us Economic Efficiency Economic Growth
At point “R” the economy
is not fully utilizing all its
resources or factors of production.
At point “R” it is assumed that the
economy is experiencing unemployment.
110
100
Burritos 60 R 30 4 11 13 14
Engines

9. A Final Point: Opportunity Costs
Constant
Increasing
Law of Increasing Opportunity Costs
110 B
100
At a Opportunity Cost
of 40 Burritos
Burritos C 60
At a Opportunity Cost
of 30 Burritos
Moving from point “C” to “D”
costs 15 burritos for each new
engine. D 30
Moving from point “B” to “C”
costs approximately 6 burritos
for each new engine.
7 Engines Gained
2 Engines Gained 4 11 13 14
Engines

10. A final task
Your turn! Give it a try . . .