Search Investopedia

Production Possibility Frontier - PPF

Filed Under » , ,
Dictionary Says

Definition of 'Production Possibility Frontier - PPF'

A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.). The PPF assumes that all inputs are used efficiently.

Production Possibility Frontier (PPF)


As indicated on the chart above, points A, B and C represent the points at which production of Good A and Good B is most efficient. Point X demonstrates the point at which resources are not being used efficiently in the production of both goods; point Y demonstrates an output that is not attainable with the given inputs.
Investopedia Says

Investopedia explains 'Production Possibility Frontier - PPF'

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.

Related Definitions

  •

    Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service.
    Read More »

  • Comparative Advantage

    A situation in which a country, individual, company or region can produce a good at a lower opportunity cost than a competitor.
    Read More »

  • Macroeconomics

    The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of ...
    Read More »

    • Opportunity Cost

      1. The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.2. The ...
      Read More »

    • Trade

      A basic economic concept that involves multiple parties participating in the voluntary negotiation and then the exchange of one's goods and services for desired goods and services that ...
      Read More »

    • Excess Capacity

      A situation in which actual production is less than what is achievable or optimal for a firm. This often means that the demand in the market for the product is below what the firm could ...
      Read More »

    • Equity-Efficiency Tradeoff

      An economic situation in which there is a perceived tradeoff between the equity and efficiency of a given economy. This tradeoff is commonly viewed within the context of the production ...
      Read More »

    • Production Efficiency

      1. An economic level at which the economy can no longer produce additional amounts of a good without lowering the production level of another product. This will happen when an economy is ...
      Read More »

    • Marginal Rate Of Transformation

      The rate at which one good must be sacrificed in order to produce a single extra unit (or marginal unit) of another good, assuming that both goods require the same scarce inputs. The ...
      Read More »

    • Neoclassical Growth Theory

      An economic theory that outlines how a steady economic growth rate will be accomplished with the proper amounts of the three driving forces: labor, capital and technology. The theory ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions