The production alternatives that are "possible" given a set of inputs and a state of technology ar

described by a Production Possibilities or Transformation Function. Sometimes this function is ca

a "Production Possibilities Frontier."

The quantities of goods that can be produced are a function of technology and the quantity and quality of inputs. Sh
any of these change the range of production alternatives will be altered. Regulations and social institutions may also
the range of production altenatives or the choices made within the range of feasible alternatives.

In this exercise the forces that determine the production alternatives will be considered as well as the "tradeoffs"
are caused by relative scarcity of inputs as well as goods and services.

The concept of "efficiency" will be considered. Specifically we will look at "technical efficiency" and Pareto Efficien
Allocative or Economic Efficiency will be considered in a separate workbook.
 © R Larry Reynolds 1999

and a state of technology are

Sometimes this function is called

e quantity and quality of inputs. Should

ns and social institutions may also alter
ble alternatives.

sidered as well as the "tradeoffs" that

cal efficiency" and Pareto Efficiency.

Instructions
Locators An increase in inputs or Production Possibilities
PPF technology that equally affects
production of goods X and Y. 45
Xebecs Yawls
0 36.96 40
1 36.95
2 36.91 35

Yawls (Y)
3 36.85 An increase in inputs or
4 36.75 technology that only affects 30
production of Xebecs (X).
5 36.62
25
6 36.47
7 36.27
20
8 36.05
9 35.79 An increase in inputs or 15
10 35.49 technology that only affects the
production of Yawls (Y).
11 35.16 10

12 34.78
5
13 34.37
14 33.91
0
15 33.41 Xebecs, X = 15.00
0

10

15

20

25

30

35
16 32.86 Yawls, Y = 33.41 Xebecs (X)
Production Possibilities
15

20

25

30

35

40

45

Xebecs (X)
Instructions Select a quantity of Xebecs (X<40) and a
Efficiency quantity of Yawls (Y<45) to produce. This is a
PPF Production Poss
production alternative associated with a
Xebecs Yawls specific allocation of inputs.
45.00
0 43.69 Xebecs (X < 40)= 20.00 Enter values

Yawls ( Y )
in yellow 40.00 39.83
1 43.65 Yawls (Y < 45) 30.00 cells.

2 43.54 Try to select a set of quantities that will 35.00

3 43.38 move the RED DOT to the PPF. Any set
30.00 30
4 43.17 of alternatives that is outside the PPF is
5 42.91 not feasible.
25.00
6 42.61
7 42.25 HINTS 20.00

8 41.86 If Xebecs, X = 12.00

15.00
9 41.42 the maximum amount of Yawls you can produce is

10 40.93 Y = 39.83 10.00

11 40.40 (YELLOW DOT)

5.00
12 39.83
13 39.20 0.00

10

15

20
14 38.53
15 37.82 Xebecs
16 37.05
 Production Possibilities

39.83

30.00
5

10

15

20

25

30

35

40

45

Xebecs (X)
 Cost Current Production Altenative (Yellow Dot)
Instructions Xebecs, X = 1.00 16.00
PPF Yawls, Y = 14.97 15.00
15.00 14.97
Xebecs Yawls Change output of X, 14.00
0 15.00 Unit number 1 of X 13.00
1 14.97 requires a sacrifice or cost of 12.00

Yawls ( Y )
2 14.87 0.033 units of Y
11.00
3 14.70
The previous level 10.00
4 14.46 0.00 units of X
of output was 9.00
5 14.14 15.00 units of Y
8.00
6 13.75
7.00
7 13.27 The opportunity cost of the additional X is
6.00
8 12.69 15.000 (previous Y)
5.00
9 12.00 - 14.967 (current Y)
4.00
10 11.18 0.033 units of Y
3.00
11 10.20
2.00
12 9.00
13 7.48 1.00

14 5.39 0.00

10

12
15 0.00 Xebecs (X)
16 #VALUE!
97
4

10

12

14

16

Xebecs (X)