Episode 2: Production Possibilities Frontier


In this episode we’ll look on the concept of Production Possibilities Frontier or Production Possibilities Curve.

Production Possibilities Curve is an economic model to demonstrate opportunity costs and trade offs. It’s easy to visualise opportunity costs or trade offs through a model or diagram. The curve shows the various combinations of goods and services an economy can produce when all productive resources are employed.
There are 4 assumptions regarding the model:
1. Efficiency: full employment and productive efficiency.
2. Fixed resources: no more available but are shiftable.
3. Fixed technology: state of technology does not change in the period.
4. Two goods: hypothetical to produce just 2 goods or products

There are 2 methods of analysing:
1. Production possibility schedule or table.
2. Production possibility curve

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