Production Possibility Diagrams
AQA 3.1.1.5
, Production Possibility Frontiers (PPF)
A PPF shows alternative combinations of two goods or services
attainable when all resources are fully and efficiently employed
• We normally draw a PPF as Output Remember to express output
concave to the origin i.e. when of in a given time period
we move down along the PPF, as Good X
A
more resources are allocated
X1 B
towards Good Y the extra
output gets smaller X2
• This is explained by the law of
C
diminishing marginal returns, it
X3
occurs because not all factor
inputs are equally suited to
producing items leading to
lower productivity Y1 Y2 Y3
• Land, labour and capital are Output of Good Y
imperfect substitutes
AQA 3.1.1.5
, Production Possibility Frontiers (PPF)
A PPF shows alternative combinations of two goods or services
attainable when all resources are fully and efficiently employed
• We normally draw a PPF as Output Remember to express output
concave to the origin i.e. when of in a given time period
we move down along the PPF, as Good X
A
more resources are allocated
X1 B
towards Good Y the extra
output gets smaller X2
• This is explained by the law of
C
diminishing marginal returns, it
X3
occurs because not all factor
inputs are equally suited to
producing items leading to
lower productivity Y1 Y2 Y3
• Land, labour and capital are Output of Good Y
imperfect substitutes
