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

 
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. It
accurately shows the production levels of the maximum to the minimum amounts produced
in a uniformly drawn curve. Usually, it is 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 typically
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. It depends on the number
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, 
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real costs of foregone alternatives (opportunity costs), economies of scale and even the
efficiency of a given product in an economy. Basically, an outward shift of the PPFs curve is
as a result of the growth of the availability of input factors (Thompson 1985).
These input factors could either be the growth of the labor quantity that is physical
capita or technological advancement of the present laborers that does transform the inputs to
positive output. The outward shifts are well known to accommodate the growth of an
economy that is maximally operating in the PPF. It means more outputs can be greatly
achieved without entirely reducing the output of either of the goods under consideration
within a given time for an economy (Diewert 1973).
On the other side of the coin, an inward curve shift in a PPF can be caused by the
following: the reduction in the size of labor force in a given economy, the utilization raw
materials supplied poor technologies and even outcome of natural disasters that indirectly
affects the size of the labor hence reduction in the productivity output. Most contractions in
the PPFs do represent the economies operation below the required frontier while clearly
showing its main priorities (Diamond & Merles 1971). A good example is a choice by an
economy to produce relatively more capital goods or services and relatively fewer consumer
goods or services, or the other way round.
There are several assumptions made by any economies during the usage of the two
good models of a production possibility frontier. The government barely assumes that in that
particular situation, ecological calamities, natural disasters, and military intrusion will not
happen. The assumption is that even if these calamities do happen, they cannot negatively
affect the production possibility frontier (PPF) in any way. Other assumptions include land
level being held constant among others (Thompson 1985). 
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For example, let's take an economy that does the production of two goods: wine and
cotton only. It means we are holding other factors constant. According to this PPF, we have
several points A, B, C, X, and Y. We have cotton as production B and at the base and wine at
the height as production A. We have two other points which are X and Y. The position inside
the curve noted as X represents an inefficient use of the resources. The spot outside the curve
noted as Y represents goals that that particular country cannot attain with its currents
resources available.
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The diagram above was made for the economy to produce more wine. Then it has to
give up some of the resources it has invested in cotton for wine. This step will give a general
increase in the production of wine, as noted in point B to point A. On the other hand, when
this economy does want to produce more cotton, then it has to divert some resources from
making wine to cotton production. It will consequently experience a reduction in the amount
of wine produced and an increase in the amount of cotton produced. This is shown as a drop
to point B as from previous point A, which means the economy has substituted wine
resources for cotton. However, if the economy does move from point B to a current point C,
wine production is highly reduced while there is a significant increase