What is a PPF?

A production possibility frontier (PPF) shows the maximum combinations of two goods an economy can produce when all resources are fully employed and technology is fixed. Points on the frontier are productively efficient; points inside show unemployed or under-used resources; points outside are currently unattainable.

Factors that shift the PPF

Outward shift (economic growth)

• More / better quality resources — e.g. discovery of raw materials, improved land fertility.
• Increased quantity or quality of labour — immigration, higher participation, better training and education.
• Increased capital stock — investment in machinery, infrastructure and technology.
• Technological progress — raises productivity so more output is possible from the same inputs.
• Specialisation and trade — access to imports can effectively expand what the economy can consume (open-economy PPF).

Inward shift (economic decline)

• War or conflict — destroys capital and reduces the labour force.
• Natural disasters — damage to infrastructure, farms and factories.
• Emigration / ageing population — fewer workers and lower productive potential.
• Depletion of resources — e.g. exhausted oil reserves or environmental degradation.
• Lower investment — capital stock wears out without replacement (capital consumption).