In economics, a production possibilities frontier (PPF) or “transformation curve” is a graph that shows the different quantities of two goods that an economy (or agent) could efficiently produce with limited productive resources. Points along the curve describe the trade-off between the two goods, that is, the opportunity cost. Opportunity cost here measures how much an additional unit of one good costs in units forgone of the other good. The curve illustrates that increasing production of one good reduces maximum production of the other good as resources are transferred away from the other good.
When the production of both goods (X and Y) increased, the PPF will shift out (parallel shift). This is a way to represent economic growth graphically.
What causes the PPF shift?
1. Technological advance
2. More resource
3. Better resource
4. Government policies
5. Trade with other countries
.etc
Three basic assumptions underlie the production possibilities frontier model"
