PPF Curve: Production Possibility Frontier Basics

Our country makes food and clothing, and is currently operating at maximum efficiency, given the availability of exhaustible (scarce) resources like, land, labor, and technology. The PPF curve shows the economic choices a country can make about production given scarce resources, a given technology. If foreign economies start investing in our country, then we will have to make a choice between making more food or clothing.

We could apply that investment money to purchase more scarce resources in order to become more efficient and produce more, of the certain product. Of course if we make more food, then we cannot make as much clothing, which lasts longer and makes our people happy to look good. That is an example of opportunity cost in this situation.

On a chart, the PPF curve can shift to the left or the right. Scarce resources are what keep the chart from shifting out to the right, which means more production. If the country has investors, it can shift to the right. Of course a shift to the left can be done at any time, because this means the country is not working at its maximum efficiency.

If you have a country that makes 2 things, and wants to produce more of one of those things, then there will be costs. The PPF curve also shows what those costs are, the main one being being able to produce less of the other thing. This is just a simple explanation of the PPF, and how it works. Now you should be a little more familiar with the production possibility frontier (PPF) of an economy.