The frontier shows a production limit under stated conditions.
A production possibility curve (PPC) shows the maximum combinations of two outputs achievable over a period with given resources and technology, using those resources efficiently. Both axes measure output quantities. A point on the frontier is productively efficient in this model: more of one output requires less of the other. A point inside is attainable but leaves scope for better use of resources; the point alone does not identify why. A point outside cannot currently be produced under the stated assumptions. The frontier does not identify which feasible mix is fairest or most valuable to society.
- The production limit
- A production possibility curve (PPC), also called a frontier, shows the maximum combinations of two outputs possible in a period with given resources and technology. Both axes measure output quantities, not prices.
- On the frontier
- Resources are fully and efficiently used. Making more of one output requires making less of the other: this is productive efficiency. It does not prove that society prefers this mix.
- Inside the frontier
- The combination is attainable, but more could be produced with better use of existing resources. The point alone does not tell us whether workers are idle, equipment is poorly used or something else explains the gap.
- Outside the frontier
- The combination cannot currently be produced with the stated resources and technology. A change in capacity could make it possible later.
What the diagram can and cannot show
State the assumptions
Specify two outputs, the period and given resources and technology. The frontier uses the resources fully and efficiently. Its coordinates represent production, not the prices of the goods.
Productive efficiency is not the preferred mix
At a frontier point, more of one output requires less of the other. Deciding whether to prefer more benches or repairs also needs preferences, benefits and costs; the curve alone supplies no uniquely best point.
Full resource use is a model statement
It does not mean every person is in paid work. Children and non-participants are not all unemployed workers, and the diagram is not an observed unemployment-rate calculation.
Be careful about consumption
A domestic production frontier limits domestic output under its assumptions. It does not by itself establish consumption possibilities when trade is allowed. Trade theory is a later topic.
| Point | Bicycle repairs | Benches |
|---|---|---|
| E | 0 | 50 |
| A | 10 | 45 |
| B | 20 | 35 |
| F | 30 | 20 |
| G | 40 | 0 |
Worked example: Workshop capacity
A group of workshops can achieve these frontier combinations of bicycle repairs and benches: (0,50), (10,45), (20,35), (30,20), (40,0). Between neighbouring points, use straight segments for this illustration.
- Put bicycle repairs per week on the horizontal axis and benches per week on the vertical axis. The coordinates are quantities, not prices.
- A = (10,45) and B = (20,35) are on the frontier. Resources are fully and efficiently used at both, but the output mix differs.
- C = (20,20) is inside: at 20 repairs, the schedule allows 35 benches. Idle resources or inefficient organisation could explain the gap; the coordinates do not tell us which.
- D = (30,40) lies outside: the schedule allows only 20 benches at 30 repairs. Production at D needs changed capacity or assumptions. The production frontier is not a statement about what trade might allow an economy to consume.
Watch out for this
Every point on the PPC is the best allocation for society.
The PPC shows feasible productive efficiency. Choosing the preferred mix also requires information about needs, preferences and the value placed on different outcomes.
Check your understanding
With the workshop schedule above, how should (20 repairs, 20 benches) be interpreted?
- Unattainable because it does not lie exactly on the frontier.
- Attainable, with scope to use resources more fully or efficiently.
- Proof that the economy has too much unemployment and no other problem.