Productive Efficiency and In Efficiency of a Production Possibility Frontier

Productive Efficiency and In Efficiency of a Production Possibility Frontier (PPF) Introduction

The production possibility frontier is also known as the (PPF) in the economics world. It is simply a graph or diagram that does clearly show the production rate of two goods and/or services that an economy does produce efficiently or inefficiently over a given period of time. It accurately shows the production levels of the maximum to the minimum amounts produced in a uniformly drawn curve. This is usually compared to another curve that shows shifts either above or below the original one. This second curve clearly shows the production efficiency or inefficiency under given factors which either favor for or against the production levels of a given economy (Thompson 1985). Identifiable major points are drawn on the graph using two major factors while holding others constant and then a curve is drawn using several points on the graph (major points). Minor points that are usually within this curve are usually considered to be reachable but not efficient (Christensen, Jorgenson & Lau 1973).

Statement

Although most curves are drawn being concave like, that is bulging outwards from the starting point; the PPFs can be at times represented as straight lines or convex like shaped, which are bulging inwards from the origin of the graph or diagram. This depends on the amount of factors under consideration. PPFs which are also known as the production possibility curve or product transformation curve are used to represent several aspects like, resource scarcity , real costs of forgone alternatives (opportunity costs), economies of scale and even the efficiency of a given production in an economy. Basically an outward shift of the PPFs curve is ...

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...ll ensure general growth rate of given economy. It also shows the different opinions held by an individual or organization in a two-good model. By definition, all the curves have an efficient production, but depending on the nature of the market some will be more productive than others. The given equilibrium of an economy given PPF will be the combination of the given outputs that is most profitable. It basically shows the production possibilities in that economy over a given period of time. Factors such as market failure can at times arise, these may be due to imperfect competition or other externalities’ not taken into account. These can lead to wrong grouping of goods being produced hence wrong mixing and allocation of needed resources. These can be different to what the consumer really given what is consumable on the given production possibility frontier (PPF).