PPF

1. Warm up question:
Tell me about a choice that you made
yesterday. What was the opportunity cost of
that choice?

2. Unit 1:
Production Possibility Frontier (PPF)
Scarcity,
Choice and
Opportunity
Cost: All in
One Visual!

3. Production Possibility Frontier (PPF)
• A graphic representation of all
possible combinations of two goods
that an economy can produce.
• By analyzing a PPF you can determine
the opportunity cost of choice and see
the existence of scarcity.
• You can also determine what effect
resources and technology have on
production possibilities.

4. The economy can efficiently produce
any of these combinations of
snowboards and skis.

6. Scarcity and the PPF
Things on the curve (A-D) are
available.
The curve shows efficient use
of resources.
What we can’t have- what is
unavailable to us because we
don’t have enough resources to
produce it- is anything beyond
the PPF (F)
Beyond the curve is
unattainable.
● That’s how the PPF shows us
scarcity.
● We can also underutilize our
resources (E)
● Below the curve shows
inefficient use of resources.

7. Opportunity Cost and the
PPF
● We know we can’t
produce points A-D at the
same time. We must make
a choice.
● Once we make a choice,
opportunity cost “pops up.”
● If we narrow our choices
to B and C, and choose C.
● We increase production
of skis by 20,000
● What is the opportunity
cost of 20,000 more
skis?
● The opportunity cost of
20,000 more skis is
15,000 snowboards

8. Another Example
● Computers and Cars

9. Figure 2 The Production Possibilities Frontier
Copyright©2003 Southwestern/Thomson Learning
Production
possibilities
frontier
A
B
C
Quantity of
Cars Produced
2,200
600
1,000
3000 700
2,000
3,000
1,000
Quantity of
Computers
Produced
D
What is the opportunity
cost of increasing cars
by 100?

12. Shifts in the Curve
● The location of the PPF for an economy is
determined mostly by the amount of resources
available and the level of technology in society.
● If more resources become available or the level of
technology increases, more goods and services can
be produced and the PPF will shift to the RIGHT.
● If the amount of resources diminishes, if there is
less, the economy can no longer produces at
previous levels and the PPF will shift to the LEFT.

13. Figure 2 The Production Possibilities Frontier
Copyright©2003 Southwestern/Thomson Learning
Production
possibilities
frontier
A
B
C
Quantity of
Cars Produced
2,200
600
1,000
3000 700
2,000
3,000
1,000
Quantity of
Computers
Produced
D
What would happen if
new computer
technology was
released?

14. Figure 3 A Shift in the Production Possibilities Frontier
Copyright © 2004 South-Western
E
Quantity of
Cars Produced
2,000
700
2,100
7500
4,000
3,000
1,000
Quantity of
Computers
Produced
A