30 Outcome: The Production Possibilities Frontier

What you’ll learn to do: illustrate society’s trade-offs by using a production possibilities frontier (or curve)

Now that we understand positive and normative statements, let’s return to how individuals and societies make choices. Here we’re going to focus on production and the tradeoffs involved in producing one thing versus another.

First we’ll consider the example of a student, whose limited time means that doing one thing necessitates doing less of another thing. You’ll learn how to show these choices and consequences graphically. A single individual making choices between two different production options is the simplest scenario, so it’s important to understand this case before moving on to more complex ones.

Next, we’ll explore the idea of production options on a much bigger scale—on the level of what an entire society can produce—and use what’s known as the production possibilities curve (also called the production possibilities frontier) to see the different choices.

The production possibilities curve is a diagram that shows the possible combinations of two products or services that could potentially be produced within a society. For example, a country could choose to spend all of its income on defense or on education. The curve represents points where the country could maximize the use of its resources by choosing to produce a combination of defense and education, devoting all its resources to just defense, or devoting them just to education. In this section you’ll gain some first-hand experience with economic models and graphing tools, too.

The specific things you’ll learn in this section include the following:

  • Explain the production possibilities frontier
  • Identify the impact of society’s production choices

Learning Activities

The learning activities for this section include the following:

  • Video: Society’s Production Possibilities Curve
  • Reading: The Production Possibilities Frontier
  • Reading: Productive Efficiency and Allocative Efficiency

License

Icon for the Creative Commons Attribution 4.0 International License

Microeconomics by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

Share This Book