Production Possibility Frontier


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Production Possibility Frontier

A graphical representation of the possible outputs using two or more inputs assuming that all inputs are used efficiently. For example, if one wishes to determine the most efficient use of raw material and labor to make as much of a product as it efficient, one may design a PPF that would show all possible production outputs, which is shown as a curve. One would then find the most efficient point on a curve and use resources accordingly.
References in periodicals archive ?
Suppose that given the production functions of X and Y (that is, the physical conditions of production) and the quantity of K and L allocated to each output, society is at a point of the production possibility frontier where 1 unit of Y substitutes for 1 unit of X or, alternatively, that the cost of production of X in terms of Y is 1 (this is called the rate of transformation of Y to X).
Key words: benchmarking, production possibility frontiers, efficiency/inefficiency measurement, J-Curve of adoption of innovations, convergence.
With more goods than factors, it is possible for the economy's static production possibility frontier to be a hyperplane in the multi-dimensional commodity space of goods available at a given time.
Rational behavior, joined with long run competitive market forces, are assumed to force the economy to produce along the production possibility frontier.
In this case, input supply curves are horizontal and the economy's production possibility frontier is specified for a given level of total input cost.
p] represents the production possibility frontier of a planned economy in which output composition is fixed by the "centre" in point Ep, and does not match consumers' preferences (this point displays the deliberate violation of the Paretian condition that requires the marginal rate of transformation in production to equal marginal rates of substitution in consumption).
5 In pure production settings such as that used to derive production possibility frontiers, no surrogate measures are necessary.

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