Definition of Production possibilities curve
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Production possibilities curve Definition from Social Science Dictionaries & Glossaries
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In economics, a production–possibility frontier (PPF), sometimes called a production–possibility curve, production-possibility boundary or product transformation curve, is a graph representing production tradeoffs of an economy given fixed resources. The graph shows the various combinations of amounts of two commodities that an economy can produce (e.g., number of guns vs kilos of butter) using a fixed amount of each of the factors of production. Graphically bounding the production set for fixed input quantities, the PPF curve shows the maximum possible production level of one commodity for any given production level of the other, given the existing state of technology. By doing so, it defines productive efficiency in the context of that production set: a point on the frontier indicates efficient use of the available inputs, while a point beneath the curve indicates inefficiency. A period of time is specified as well as the production technologies and amounts of inputs available. The commodities compared can either be goods or services.
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