Production Possibility Frontier
A curve showing the maximum combinations of two goods an economy can produce with its available resources.
What is PPF?
The production possibility frontier (PPF), also called the production possibility curve (PPC), is a graphical model showing all combinations of two goods or services that an economy can produce when all resources are fully and efficiently employed. Points on the curve represent maximum productive efficiency; points inside are inefficient (resources are underutilized); points outside are currently unattainable. The PPF is bowed outward because resources are not equally suited to producing both goods — increasing production of one requires sacrificing increasing amounts of the other, demonstrating the law of increasing opportunity cost. Economic growth, capital accumulation, or technological advances shift the PPF outward.
Example
Consider an economy producing only wheat and steel. Dedicating all resources to wheat yields 100 tons; to steel, 50 tons. A combination of 60 tons of wheat and 35 tons of steel lies on the PPF. If improved farming technology is discovered, the PPF shifts outward for wheat — producing 80 tons of wheat and still 35 tons of steel becomes achievable — illustrating how productivity gains expand an economy's productive capacity.