2. What is the production possibility frontier? The PPF is a graphical representation of the possible combinations of the production of two goods or services that the economy can produce at any given time
3. So let’s use an everyday example to explain how the production possibility frontier actually works...
4. Scenario: Spend more on flowers or invite more guests to the wedding? In this PPF, when making full use of resources, one can choose between choices A-G when deciding on how much to spend on flowers as opposed to how many guests they may invite to their wedding Guests Flowers ($)
5. Scenario: Spend more on flowers or invite more guests to the wedding? The curve shows how when more is spent on one choice, more of the other choice must be foregone, as there is a limited amount of resources. In other words, if one bought 600 units worth of flowers, they would not be able to afford to have any wedding guests :O Guests Flowers (units)
6. Scenario: Spend more on flowers or invite more guests to the wedding? Therefore, because all resources are being used, making a choice beyond the boundary line (on the right of the line) is impossible! Guests Flowers ($)
7. Scenario: Spend more on flowers or invite more guests to the wedding? If one were to make a decision placed on the left of the boundary line, they would have money left over that they could be using to have a more elaborate wedding Guests Flowers ($)
8. So, overall: The PPF is a helpful tool in calculating the opportunity cost of making any choices This concept cannot only be applied to individual examples such as this, but to economic decisions also
