Production possibilities curve/ frontier (PPF)

A production possibilities curve, also known as a production possibility frontier (PPF), is a graphical representation of the maximum combinations of goods and services that can be produced with a given set of resources. It plots all the possible points where a given economy can efficiently produce two goods, showing the maximum amount of each and the combinations of the two that can be produced. It also illustrates the concepts of economic efficiency, trade-offs, and opportunity cost. The PPF uses the concept of scarcity to show how limited resources determine the optimal production of goods and services, and serves as a tool for analyzing a country’s ability to produce and trade goods. The PPF has the shape of a bowed-out curve, which is generally concave to the origin and extends outward on both axes. This outward shape reflects the opportunity cost of producing more of one good, due to the loss of resources that could have been used to produce more of the other good. The PPF can also show how an increase in resources can enable an economy to produce more goods and services.