PRECAUTIONARY ASSETS AND THE PRODUCTION POSSIBILITIES FRONTIER
This is the problem of production above the production possibilities frontier (PPF) in Roger Garrison's diagrammatic description of Austrian capital-based macro-economics.
The input orientation gives the proportional reduction in all inputs that would bring a farm to the frontier isoquant while the output model reflects the proportional increase in outputs attainable by moving to the production possibilities frontier
holding input quantities constant.
The concept of a production possibilities frontier
, as most economists must agree, is well-suited to analyse this issue.
In the same diagram, sketch their joint production possibilities frontier.
In a similar fashion, if they can't combine two individual (linear) production possibilities frontiers to get a joint production possibilities frontier, it is extremely unlikely that they will develop any real understanding of such important concepts as opportunity cost (as represented by the slope of a production possibilities frontier), comparative advantage, and absolute advantage.
Another example might be their ability to combine the concepts of opportunity cost and production possibilities frontiers to model absolute and comparative advantage.
The theoretical construct of a convex production possibilities frontier existing at a particular moment in time is a concept that is, in one sense, deeply grounded in reality.
Technological progress can be represented as an outward shift of the production possibilities frontier.
To illustrate the first point, consider technological progress that shifts the production possibilities frontier from [T.
However, Marshallian demand is misleading in general equilibrium, since prices and endowments are not fixed but are given by the production possibilities frontier
Production Possibilities Frontier
, Economic Growth, and Gains from Trade