Difference Between Similar Terms and Objects

Difference Between PPF and PPC

PPF vs PPC

The world of economics is one that can be very complicated. Laws of supply and demand, factors of production, allocable resources, opportunity costs, scarcity; these are all terms and concepts that affect the economy on the macro- and the microeconomic levels. It is no surprise that different calculations and mathematical equations are involved in each and every major concept. It is quite common to encounter graphical representations of these calculations. One of the most common used is the Production Possibility Frontier (PPF) or the Production Possibility Curve (PPC) which are used when comparing two commodities and their effects on each other.

The Production Possibility Frontier (PPF) is an economics term referring to a graphical representation of the possible combinations or rates that two different commodities will be produced at given the same amount of resources, manpower, and other factors of production available within a certain period of time. Production Possibility Curve (PPC) is simply another term used to refer to this. Other terms used in the same way are Production Possibility Boundary and transformation curve.

A PPF/PPC model would theoretically show the comparison of one commodity’s production in comparison to the level of another and what effect the decrease or increase of one commodity’s production will have on the other. Note that this is not limited to a physical commodity or goods as the PPF/PPC can also be used to represent the productive efficiency of services. The desired result is to maximize the potential output level of one of the commodities in relation to that of the other. A PPF/PPC representation can take the shape of a concave or a straight line, (aka “linear”), depending on the elements and factors being taken into the equation. Many economic concepts and problems can be represented using a PPF/PPC, such as productive efficiency, allocation, opportunity cost, limited or scarce resources, and the like. Even factors of a larger scope in the economy such as economic growth or stagnation, the effects of supply and demand, dwindling labor force, and so on can be represented with a PPF/PPC if provided with all the necessary data.

The Production Possibility Frontier/Production Possibility Curve, however, is often criticized for being oversimplified and unrealistic. In general, using a PPF assumes certain constants: that wants of people are unlimited; that the resources involved are limited but have alternatives. Only two commodities are being compared, which does not factor the effect of other commodities in the overall economy, (which, in reality, any commodity would have an effect, however small); that the economy is constant and stable; it does not take into consideration any advancements in the economy (which, realistically, would have a significant impact on the production, particularly if the period of time used is in years); factors of production (i.e., land, labor, and capital goods) are constant and always available; and, finally, that the entire economic environment is unchanging (which, as we all know, is unrealistic as it can shift at any time). Despite these criticisms, PPF/PPC models are commonly used for getting rough estimates on what commodities are needed, how much should be produced, what needs to be adjusted with the allocation of resources, potential economic growth, and such.

The great thing about the PPF/PPC concept is that it is very versatile in application. It can be used in the macroeconomic level, as mentioned before, but it can also be used at the microeconomic level to address the same problems in budgeting of a household or even at the individual level. For instance, by using the PPF/PPC model, a student can compare their productivity between two subjects and see where he is more effective, thus being able to make adjustments so that he can improve the one where he is lagging behind (figuring where changes need to be made to improve his “productivity”).

Summary:

1.Production Possibility Frontier (PPF) is a graphical presentation of the effects of one commodity or product compared to another.
2.Production Possibility Curve (PPC) is merely another term used in reference to this, but the concepts are the same.
3.PPF/PPC is often criticized due to the unrealistic assumptions it makes when calculating for the results.
4.PPF/PPC use a simplified model which can be in a concave or a linear representation to determine factors that can affect the productivity of two goods or services.


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