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 ?
Chapter 4 by Eirik Romstad brings in a theoretical discussion about the nature of public and private goods, production possibility frontiers of public goods in terms of their relative prices.
Key words: benchmarking, production possibility frontiers, efficiency/inefficiency measurement, J-Curve of adoption of innovations, convergence.
In the early literature on production possibility frontiers (see, for example, AIGNER & CHU, 1968; AFRIAT, 1972), it was assumed that the leader of a sample was always reaching the boundary of the frontier.
Germany, France, the UK and the Netherlands is analysed by using a stochastic production possibility frontier approach.
It should be noted that this model is not that of two economies marked by the same consumer's tastes but distinct production possibility frontiers, and thus different pre-trade relative prices.
Moreover, since some production factors are, at least, partly commodity-specific, the reorientation of output pattern can follow only along the new production possibility frontier which in the short-run should lie inside the previous one.

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