Production Possibility Frontier - PPF

See: Production Possibilities Curve.

Also known as the production possibilities curve (PPC), the production possibilities frontier (PPF) is an economic graph showing the different possible combinations for producing two goods as efficiently as possible, given the available inputs.

Say there’s a flower shop that sells two kinds of flower products: bouquets (for Valentine’s Day, Mother’s Day, etc.) and wreaths (for funerals). Bouquets are on the y-axis, and wreaths are on the x-axis. All points on the plane represent different production possibilities. Maybe the shop will produce 10 wreaths and 20 bouquets. Maybe it will produce 15 wreaths and 2 bouquets.

The PPF curve bows outward. It shows all of the best options the flower shop has, assuming the flower shop wants to maximize profits. Any production possibilities below the curve just aren’t efficient; either there are flowers left unused, workers screwing around, or both. Beyond the PPF, to the right and above, are production possibilities that aren’t possible right now...not enough inputs. If the technology increases, or if the flower shop gets more flowers, that could shift the PPF to the right, increasing the output possibilities.

The PPF is important in economics because it covers a lot of basics. The line itself shows all of the most efficient options for production given limited resources. Changing production from one point on the PPF to another (say, switching from producing 20 bouquets and 10 wreaths to 10 bouquets and 20 wreaths) demonstrates the idea of tradeoffs and opportunity costs.