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Production Possibility Frontier - PPF
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A curve showing all maximum output possibilities of two or more goods given a set of inputs (resources, labor, etc.).
The PPF assumes that all inputs are used efficiently. Among others, factors such as labor, capital and technology Will affect where the production possibility frontier lies. The PPF is also known as the production possibility or transformation curve.
PPF or "transformation curve" is a graph that shows the different quantities of two goods that an economy (or Agent) could efficiently produce with limited productive resources. Points along the curve describe the trade-off between the two goods, that is, the opportunity cost. Opportunity cost here measures how much an additional unit of one good costs in units forgone of the other good. The curve illustrates that increasing production of one good reduces maximum production of the other good as resources are transferred away from the other good.
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Financial Research Associates, LLC
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