<p>Another example for the different possibilities of maximum amounts of good/services that an economy/country can produce could be that of guns or butter, the country must make a decision between the two possibilities and how much of the two goods they want to produce. in this case guns mean armaments (for the defence of the country) and butter means food (to be consumed for the population). futhermore, the choice made between two possibilities involves an oppurtunity cost and the country/economy must make a decision based on its current economic situation. A  country might want to produce more of capital goods as they will create a future stream of benefits whereas consumer goods are consumed immediately having no long term benefits. Another choice that the economy could face is between <strong>education and healthcare</strong>, if the country has as ageing population like Japan, they might want to invest more in healthcare, but with a growing population like that in India, the country might want to invest in the alternative of education more than investing in healthcare. Since the resources required in any of the examples are not the same the PPC is always going to be curved.</p>

CC BY-SA 4.0
2018-10-08T12:54:34.167Z
2018-10-08T12:54:34.167Z
user19687
<p>Production possibility frontier is not about producing two different goods, it is about producting one good, with two different resources, typically labour and capital.</p>

<p>For instance, a PPF would be how to produce a car, with either machines or workers. If you have a lot of machines you need less workers, and conversely.</p>

<p><strong>Edit1</strong> 
Note that these domains are -to my limited knowledge- mainly used for theoretical purposes, namely the two welfare theorems and their implications. I am not sure it is the most applied branch of economics</p>

CC BY-SA 3.0
2015-01-20T14:43:42.647Z
I like your definition of PPF in a sense that its real world application is quite obvious: e.g. time is money. But I'm talking about [this PPF meaning](http://en.wikipedia.org/wiki/Production%E2%80%93possibility_frontier)
modular
CC BY-SA 3.0
2015-01-20T15:23:01.193Z
damn since the opening of this SE i keep rediscovering undergrad economics -_- I edited my answer a little bit, Ill think more about it a bit later
Anthony Martin
CC BY-SA 3.0
2015-01-20T20:29:13.983Z
I find theoretical basis of mainstream economics very unconvincing (at least as it's often taught) - that's why I'm asking about applications of PPF concept.
modular
CC BY-SA 3.0
2015-01-21T08:23:18.543Z
@Aerandal  A production possibility frontier shows combinations of two goods that can be produced from given resources.  A line showing possible combinations of two resources to produce a given quantity of a good is known as an isoquant.
Adam Bailey
CC BY-SA 3.0
2015-01-20T09:59:19.483Z
2015-01-20T15:25:24.850Z
2015-01-20T15:25:24.850Z
Anthony Martin
<p>An example of an opportunity cost would be Japan giving up quality education for better healthcare. The marginal benefit would be having more healthcare for Japan´s elderly citizens.</p>

CC BY-SA 4.0
2020-09-29T16:59:14.450Z
2020-09-29T16:59:14.450Z
zackary.campbell
<p>I remember all those graphs from macro economics classes. I mentally imagined interns at the Fed collecting data from industry and dutifully plotting data that quantified the tradeoff between “bicycles vs computers”, and “guns vs butter”, etc. which after monthly open conference calls at the Fed translated to multi-billion dollar contracts getting awarded to Trek vs IBM, and Raytheon vs Land'O'Lakes.</p>
<p>But no such thing, I think these are merely theoretical examples to illustrate conceptually how and why an entity (company, country, etc.) that is good at many things could find ways to profitably trade with others that may be less good at some or even all those things.</p>
<p>In practice, in a free-market economy (even one with extensive government subsidies and incentives) these trades are independently discovered and executed by countless individuals and firms on countless opportunities.  There is no bureau where statisticians create and publish these PPF charts.</p>
<p>Even inside a single company, even one with a limitless market research budget, do you even get to see the canonical &quot;Price vs Quantity&quot; demand curve in anything but tiny glimpses, because no one can really afford to run the experiment running from zero price to zero demand.  You'll see products go on and off sale to get local estimates, to get some sense of it, but do that too much and customer behavior will start to change and affect the curve.</p>

CC BY-SA 4.0
2022-09-16T04:00:48.200Z
2022-09-16T04:10:30.757Z
2022-09-16T04:10:30.757Z
prototype
<p>In the 1940's the RAND corporation put together a series of simulations about war between the USA and the USSR. In the end, they came out with a series of two "good" possibilities, degree of victory and number of crew lives saved. </p>

<blockquote>
  <p>The US Air Force asked RAND to apply systems analysis to design a
  first strike on the Soviets. ....  Paxson and RAND were initially
  proud of their optimization model and the computing power that they
  brought to bear on the problem, which crunched the numbers for over
  400,000 configurations of bombs and bombers using hundreds of
  equations. The massive computations for each configuration involved
  simulated games at each enemy encounter, each of which had first been
  modeled in RAND’s new aerial combat research room. They also involved
  numerous variables for fighters, logistics, procurement, land bases,
  and so on. Completed in 1950, the study recommended that the United
  States fill the skies with numerous inexpensive and vulnerable
  propeller planes, many of them decoys carrying no nuclear weapons, to
  overwhelm the Soviet air defenses. Though losses would be high, the
  bombing objectives would be met. While RAND was initially proud of
  this work, pride and a haughty spirit often go before a fall. RAND’s
  patrons in the US Air Force, some of whom were always skeptical of the
  idea that pencil-necked academics could contribute to military
  strategy, were apoplectic. RAND had chosen a strategy that would
  result in high casualties, in part because the objective function had
  given zero weight to the lives of airplane crews.</p>
</blockquote>

<p><a href="https://www.aeaweb.org/atypon.php?return_to=/doi/pdfplus/10.1257/jep.28.4.213" rel="nofollow">Retrospectives: The Cold-War Origins of the Value of Statistical Life</a></p>

<blockquote>
  <p>RAND quickly backpedaled on the study, and instead moved to a more
  cautious approach which spelled out a range of choices: for example,
  some choices might cost more in money but be expected to have fewer
  deaths, while other choices might cost less in money but be expected
  to have more deaths. The idea was that the think tank identified the
  range of choices, and the generals would choose among them. But of
  course, financial resources were limited by political considerations,
  and so the choices made by the military would typically need to
  involve some number of deaths that was higher than the theoretical
  minimum--if more money had been available. In that sense, spelling out
  a range of tradeoffs also spelled out the monetary value that would be
  put on lives lost.</p>
</blockquote>

<p><a href="http://conversableeconomist.blogspot.com/2014/11/the-origins-of-value-of-statistical.html" rel="nofollow">The Origins of the Value of a Statistical Life Concept</a> </p>

<p>Maybe that's too much like the two input story of Aerandal. Depends on if you consider the saved lives a "savings" or a "good". For a clearer example of the guns vs. butter tradeoff, consider another example from WW II.</p>

<blockquote>
  <p>In February 1942, Fisher Body completely stopped making auto bodies
  and began assembling the famous M-4 "Sherman" tank in its No. 1 plant
  in Flint. The operation eventually moved to Grand Blanc and would turn
  out 11,358 tanks by 1945.</p>
  
  <p>Buick tackled the manufacture of ammunition, churning out 75,000
  casings per month for the duration. By the war's end, the division had
  supplied more than 12.5 million casings.</p>
  
  <p>Buick also retooled to meet the demands of making engines for the B-24
  bomber. At first, they talked of about 500 engines a month, but the
  government doubled its order by the time Buick had its tooling in
  place. By 1944, Buick's Melrose Park factory was regularly turning out
  2,000 engines a month....</p>
  
  <p>In all, more than 113,000 employees left GM to serve while the company
  churned out $12.3 billion in aircraft, tanks, vehicles and arms.</p>
  
  <p>When it was all counted up after the war, GM had produced 854,000
  trucks (including the legendary DUKW, or "Duck" amphibious vehicles),
  198,000 diesel engines, 206,000 aircraft engines, and 38,000 tanks,
  tank destroyers, and armored vehicles, not to mention vast quantities
  of guns and ammunition.</p>
</blockquote>

<p><a href="http://www.military.com/veteran-jobs/career-advice/military-transition/how-gm-divisions-tackled-war-effort.html" rel="nofollow">How GM's Divisions Tackled the War Effort</a> </p>

CC BY-SA 3.0
2015-01-20T20:20:48.717Z
I like the second part of your answer. I'm not really sure whether PPF in these cases was curved inward or outward. Still, they are true real life case when one product takes resources from another.
modular
CC BY-SA 3.0
2015-01-20T16:11:50.450Z
2015-01-20T16:11:50.450Z
BKay
<p>I'm reading an economics textbook and trying to make sense of PPF (or PPC) concept. All examples I could find are like producing computers vs food. I can't understand how it can be evaluated and applied to real life situation. Do you know any practical example of PPF?</p>

<microeconomics><production-function>
Real world production-possibility frontier example?
modular
# Real world production-possibility frontier example?

(Asked by: username_0 on 2015-01-20)

I'm reading an economics textbook and trying to make sense of PPF (or PPC) concept. All examples I could find are like producing computers vs food. I can't understand how it can be evaluated and applied to real life situation. Do you know any practical example of PPF?

**Tags:** microeconomics, production-function


---

## 5 answers

### Answer by username_6 on 2015-01-20. Score: 4 | Accepted answer

In the 1940's the RAND corporation put together a series of simulations about war between the USA and the USSR. In the end, they came out with a series of two "good" possibilities, degree of victory and number of crew lives saved.

> The US Air Force asked RAND to apply systems analysis to design a
> first strike on the Soviets. .... Paxson and RAND were initially
> proud of their optimization model and the computing power that they
> brought to bear on the problem, which crunched the numbers for over
> 400,000 configurations of bombs and bombers using hundreds of
> equations. The massive computations for each configuration involved
> simulated games at each enemy encounter, each of which had first been
> modeled in RAND’s new aerial combat research room. They also involved
> numerous variables for fighters, logistics, procurement, land bases,
> and so on. Completed in 1950, the study recommended that the United
> States fill the skies with numerous inexpensive and vulnerable
> propeller planes, many of them decoys carrying no nuclear weapons, to
> overwhelm the Soviet air defenses. Though losses would be high, the
> bombing objectives would be met. While RAND was initially proud of
> this work, pride and a haughty spirit often go before a fall. RAND’s
> patrons in the US Air Force, some of whom were always skeptical of the
> idea that pencil-necked academics could contribute to military
> strategy, were apoplectic. RAND had chosen a strategy that would
> result in high casualties, in part because the objective function had
> given zero weight to the lives of airplane crews.

[Retrospectives: The Cold-War Origins of the Value of Statistical Life](https://www.aeaweb.org/atypon.php?return_to=/doi/pdfplus/10.1257/jep.28.4.213)

> RAND quickly backpedaled on the study, and instead moved to a more
> cautious approach which spelled out a range of choices: for example,
> some choices might cost more in money but be expected to have fewer
> deaths, while other choices might cost less in money but be expected
> to have more deaths. The idea was that the think tank identified the
> range of choices, and the generals would choose among them. But of
> course, financial resources were limited by political considerations,
> and so the choices made by the military would typically need to
> involve some number of deaths that was higher than the theoretical
> minimum--if more money had been available. In that sense, spelling out
> a range of tradeoffs also spelled out the monetary value that would be
> put on lives lost.

[The Origins of the Value of a Statistical Life Concept](http://conversableeconomist.blogspot.com/2014/11/the-origins-of-value-of-statistical.html)

Maybe that's too much like the two input story of Aerandal. Depends on if you consider the saved lives a "savings" or a "good". For a clearer example of the guns vs. butter tradeoff, consider another example from WW II.

> In February 1942, Fisher Body completely stopped making auto bodies
> and began assembling the famous M-4 "Sherman" tank in its No. 1 plant
> in Flint. The operation eventually moved to Grand Blanc and would turn
> out 11,358 tanks by 1945.
>
> Buick tackled the manufacture of ammunition, churning out 75,000
> casings per month for the duration. By the war's end, the division had
> supplied more than 12.5 million casings.
>
> Buick also retooled to meet the demands of making engines for the B-24
> bomber. At first, they talked of about 500 engines a month, but the
> government doubled its order by the time Buick had its tooling in
> place. By 1944, Buick's Melrose Park factory was regularly turning out
> 2,000 engines a month....
>
> In all, more than 113,000 employees left GM to serve while the company
> churned out $12.3 billion in aircraft, tanks, vehicles and arms.
>
> When it was all counted up after the war, GM had produced 854,000
> trucks (including the legendary DUKW, or "Duck" amphibious vehicles),
> 198,000 diesel engines, 206,000 aircraft engines, and 38,000 tanks,
> tank destroyers, and armored vehicles, not to mention vast quantities
> of guns and ammunition.

[How GM's Divisions Tackled the War Effort](http://www.military.com/veteran-jobs/career-advice/military-transition/how-gm-divisions-tackled-war-effort.html)

> **Comments:**
> **username_0**: I like the second part of your answer. I'm not really sure whether PPF in these cases was curved inward or outward. Still, they are true real life case when one product takes resources from another.  

---

### Answer by username_1 on 2018-10-08. Score: 1

Another example for the different possibilities of maximum amounts of good/services that an economy/country can produce could be that of guns or butter, the country must make a decision between the two possibilities and how much of the two goods they want to produce. in this case guns mean armaments (for the defence of the country) and butter means food (to be consumed for the population). futhermore, the choice made between two possibilities involves an oppurtunity cost and the country/economy must make a decision based on its current economic situation. A country might want to produce more of capital goods as they will create a future stream of benefits whereas consumer goods are consumed immediately having no long term benefits. Another choice that the economy could face is between **education and healthcare**, if the country has as ageing population like Japan, they might want to invest more in healthcare, but with a growing population like that in India, the country might want to invest in the alternative of education more than investing in healthcare. Since the resources required in any of the examples are not the same the PPC is always going to be curved.


---

### Answer by username_2 on 2015-01-20. Score: 1

Production possibility frontier is not about producing two different goods, it is about producting one good, with two different resources, typically labour and capital.

For instance, a PPF would be how to produce a car, with either machines or workers. If you have a lot of machines you need less workers, and conversely.

**Edit1**
Note that these domains are -to my limited knowledge- mainly used for theoretical purposes, namely the two welfare theorems and their implications. I am not sure it is the most applied branch of economics

> **Comments:**
> **username_0**: I like your definition of PPF in a sense that its real world application is quite obvious: e.g. time is money. But I'm talking about [this PPF meaning](http://en.wikipedia.org/wiki/Production%E2%80%93possibility_frontier)  
> **username_2**: damn since the opening of this SE i keep rediscovering undergrad economics -_- I edited my answer a little bit, Ill think more about it a bit later  
> **username_0**: I find theoretical basis of mainstream economics very unconvincing (at least as it's often taught) - that's why I'm asking about applications of PPF concept.  
> **username_3**: @Aerandal  A production possibility frontier shows combinations of two goods that can be produced from given resources.  A line showing possible combinations of two resources to produce a given quantity of a good is known as an isoquant.  

---

### Answer by username_4 on 2020-09-29. Score: 0

An example of an opportunity cost would be Japan giving up quality education for better healthcare. The marginal benefit would be having more healthcare for Japan´s elderly citizens.


---

### Answer by username_5 on 2022-09-16. Score: 0

I remember all those graphs from macro economics classes. I mentally imagined interns at the Fed collecting data from industry and dutifully plotting data that quantified the tradeoff between “bicycles vs computers”, and “guns vs butter”, etc. which after monthly open conference calls at the Fed translated to multi-billion dollar contracts getting awarded to Trek vs IBM, and Raytheon vs Land'O'Lakes.

But no such thing, I think these are merely theoretical examples to illustrate conceptually how and why an entity (company, country, etc.) that is good at many things could find ways to profitably trade with others that may be less good at some or even all those things.

In practice, in a free-market economy (even one with extensive government subsidies and incentives) these trades are independently discovered and executed by countless individuals and firms on countless opportunities. There is no bureau where statisticians create and publish these PPF charts.

Even inside a single company, even one with a limitless market research budget, do you even get to see the canonical "Price vs Quantity" demand curve in anything but tiny glimpses, because no one can really afford to run the experiment running from zero price to zero demand. You'll see products go on and off sale to get local estimates, to get some sense of it, but do that too much and customer behavior will start to change and affect the curve.


---

