Question

State the meaning and properties of production possibilities frontier.

Answer 1

A Production Possibilities Frontier (PPF) is the locus of maximum possible combinations of two goods producible with given resources and technology. Its main properties are:

1. It slopes downward: producing more of one good requires reducing production of the other.
2. It is generally concave to the origin: the MRT increases as resources are shifted between goods.
3. Points on it represent full and efficient use of resources; points inside show underutilisation or inefficiency; points outside are unattainable with current productive capacity.