production possibility frontier


PPF. A curve that compares the trade offs between two goods produced by an economy in order to demonstrate the efficient use of resources. Points along the curve are considered efficient and obtainable, and show the maximum amount of one good that can be produced in relation to another. Points within the curve are considered obtainable but inefficient. Points outside the curve are considered impossible to obtain. A classic example considers an economy that can produce either guns or butter, and shows how a government can spend a finite amount of resources on guns (defense), butter (non-defense) or a combination of the two.

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transformation curve productive efficiency