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Production possibilities frontier (ppf)

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Explain the production possibilities frontier. What are the main assumptions?

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The PPF is used to better understand the basic economic problems of scarcity and choice. Scarcity is the most basic of problems. But, given the scarcity of financial resources that we face, we must ponder choices.

We use the production possibilities frontier to help us understand in an economic context the constraints caused by scarcity and the resulting choices. If you are taking microeconomics, choice will often be described in terms of the individual's or firm's decision. In macroeconomics, choice has a broader ...

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Macroeconomics: Production Possibilities Frontier

1. Draw and explain a production possibilities frontier for an economy that produces milk and cookies. What happens to this frontier if disease kills half of the economy's cow population?

2. Use a production possibilities frontier to describe the idea of "efficiency."

3. What is the difference between a positive and a normative statement? Give an example of each.

4. Why do economists sometimes offer conflicting advice to policymakers?

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