All across the world, every day, and people are engaging in tasks and providing services and goods worth zillions of dollars regularly. In USA alone, every day, 138 million people provide a variety of services worth nearly fifty billion dollars. Our resources and technology acts a as a barrier limiting the amount of production we can engage in regularly. If we consider our resources being maxed out and all available technology utilized then in order to increase production of one good we must decrease the production of another. This situation is known as a tradeoff. Production possibilities frontier or PPF describes the boundary up to which we can produce a certain good or engage in tradeoff.
PPF or production possibilities frontier marks the boundary between goods and services that are possible and those which aren’t. To understand PPF we take two goods in a model economy and look at their production possibilities keeping the production of all other goods constant or unchanged.
Here in the example, production possibilities of pizza and cola have been demonstrated. Here these two goods represent all pairs of goods.
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Links of Next Macroeconomics Topics:-
- Production Efficiency
- Trade Off Along the PPF
- Opportunity Cost
- Using Resources Efficiently
- Allocative Efficiency
- Economic Growth
- A Nations Economic Growth
- Gains from Trade
- Economic Coordination
- Property Rights
- The Rising Opportunity Cost of Food
- Market Equilibrium
- Employment and Unemployment
- Measuring GDP and Economic Growth
- Economic Growth Macroeconomics