The Beechmont Crest Guide to Economics
The Production Possibility Frontier
What is production?
Production is the conversion of productive inputs---labor, land, capital and entrepreneurial skill---into goods and services.
What limits production?
The quantities of goods and services that any firm can produce are limited by the available resources as well technology. This limit is represented graphically by the production possibility frontier (PPF).
The PPF is a boundary of sorts. It represents a line between the combination of goods and services that a firm can produce—and those combinations that firm cannot produce.
The production possibility frontier is usually considered within the context of two goods. Let us consider here a hypothetical computer company----Zell Computers---that manufactures laptop and desktop PCs:
The points along the PPF for Zell Computers indicate the various combinations of desktop and laptop PCs that the company can produce. Combinations on or below the PPF are attainable for the company.
Note that all points above the production possibility frontier are unattainable. Zell cannot achieve production combinations above the PPF with its current production inputs and technology.
