Production Possibility Frontier – Worksheet

Draw a production possibility frontier. The vertical axis shows the production of public sector goods and the horizontal axis shows production of private sector goods. The economy is currently

producing at point A on the frontier where 50% of all production is allocated to the production of each type of good.

a) Mark the following points on your drawing:

i) Point A.

ii) Point B, showing production following the election of a government which increases spending on both education and the NHS.

iii) Point C where unemployment is present in the economy.

iv) Point D where the government takes over production of all goods and services in the economy.

b) Draw another diagram putting on it the original ppf you drew for (a), labelling it AA.

i) Draw a new ppf on the diagram, labelling it PP, which shows the position after a devastating war has hit the economy.

ii) Draw a third ppf, labelling it QQ, which shows an increase in productivity in the economy such that output from the same resources increases by 50% in the public sector but twice the amount in the private sector.