A production possibilities frontier shows the way that the relationships between two different products influence each other. It can show the way that one product reduces the demand for another product or it can show the way that the production of a certain product can increase the demand for a different product.Continue Reading
A production possibilities frontier can also show the way that the addition of employees can increase or decrease production. For example, if there are a farm and a furniture making company, people who work on the farm may be recruited to the furniture company. The first person that is recruited will increase the production of products at the furniture company. The second and third people who are recruited may also increase the production.
When the fourth person or any person after is recruited from the farm to the furniture company, the production may not increase as much as when the first few people were recruited. This could be a result of reduced amount of supplies and reduced amount of space for the additional workers. This will then affect the way that things are produced on the farm. The farm has lost people who are employed and the people who have been recruited to the furniture company may not be working as much as they would have been on the farm.Learn more about Economics