Glossary term
Production Possibility Frontier: Meaning and Definition
Reviewed and approved by Dr. Anamika ShrivastavaPublished Last updated
The production possibility frontier (PPF) is the curve showing the maximum combinations of two goods that an economy can produce when all its resources are fully and efficiently used with a given technology. Points on it are attainable and efficient; points inside it waste resources; points outside it cannot be reached.
In more detail
The PPF is bowed outwards because resources are not equally good at making both goods. Moving along it, producing more of one good means giving up ever larger amounts of the other. Growth in resources or better technology pushes it outwards; unemployment of resources leaves the economy inside it.
Example
An economy that can make 4 units of corn or 10 of cotton might also make (1, 9), (2, 7) or (3, 4). The point (1, 5) lies inside the frontier, so some resources are idle, while (3, 7) lies outside and cannot be produced.
Key points
- It slopes downward because of opportunity cost.
- Economic growth or better technology shifts it outwards.
- It illustrates scarcity, choice and efficiency.
Common mistake
Thinking points inside the curve are unattainable. They are attainable but wasteful.
Related terms
Where it is explained
This term is explained in Class 12 Microeconomics Chapter 1: Introduction.