HGov APMacro: Production Possibilities Frontier



The necessity and consequences of choices can best be understood through a production possibilities model. each point on the production possibilities frontier represents some maximum output of two products. The curve is the frontier because it shows the limit of attainable outputs. To obtain the various combinations of the two products, society must achieve both full employment and productive efficiency. Points lying inside or to the left of the curve are also attainable, but they reflect inefficiency and therefore not as desirable as points on the curve. Points inside the curve imply that the economy could have more of both products if it achieved full employment and productive efficiency. Points lying outside or to the right of the production possibilities curve, would represent a greater output than the output of any point on the curve. Such points are unattainable with the current supplies of resources and technology.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: