The Production Possibilities Frontier

Every economy is bound by what is known as the production possibility frontier. This is a limit beyond which an economy can simply not produce any more stuff because it has fully utilized all of the resources available to it in the most efficient way possible. Good economists need to make decisions about what to produce and what not to produce so that they don't use up too much land, labour or capital for one product instead of another. Theory looks at how a change in these factors will result in a change in the outputs produced by an economy.