Question

What does a production possibilities frontier illustrate ?

Short answer

Production Possibility curve illustrates product combinations that can be produced by an economy, with given resources & technology.

Step-by-step solution

 Concept 

In this world, resources are limited with alternative uses and there are unlimited wants and needs to be satisfied. Production possibility curve is a concept used to study resource allocation.

Detailed Explanation 

PPC concept is based on following assumptions

• Resources are given fixed, and technology is constant
• All points on PPC show product combinations, done through full & efficient utilisation of resources.
• The economy produces only two goods.

PPC shows combinations of two goods, that an economy can produce with given fixed resources & constant technology.