Production Possibilities Frontier

Production Possibilities Frontier

Illustrates the trade-offs and opportunity cost of how resources are used.

Point A: Emphasis on fishing, Point B: Emphasis on farming, Point E: Inefficient use of resources, Point F: Unattainable given current resources (unless trade based on specialization).

Production possibilities table

Points used to populate a PPF. Can also be used to calculate the opportunity cost of increasing or decreasing production.

Increasing corn production from 20 (bushels) to 35 (bushels) illustrates and opportunity cost of 20 robots, etc.

PPF illustrating constant opportunity cost

PPF illustrating increasing opportunity cost

Absolute advantage

The ability to produce more with fewer/the same resources than others.

Comparative advantage

Basically, the ability to produce at a lower opportunity cost than others.