Question

In: Economics

Economics

What is a production possibility frontier in terms of economics?

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Expert Solution

The production possibility frontier (PPF) can be illustrated using a mathematical curve that showcases the balance between the production levels of two different products within limited resources. For example, if a food producer can either produce 50 mangoes or 25 oranges with the same amount of resources, the production possibility of the two can be plotted in a graph. And this gives us the production possibility frontier. PPF is calculated under the assumption that the production of product A can increase only when the production of product B is compensated. PPF data is often used by companies to determine the relative costs of producing one product over another. This data is then analysed to effectively make decisions when allocating finite resources and to increase profits.


The production possibility frontier can be illustrated using a mathematical curve.

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