Theorem of production possibilities

The Production Possibilities Theorem explains that an economy cannot produce unlimited goods and services because resources (like labor, capital, and raw materials) are limited. It shows the maximum possible output combinations of two products that can be produced with available resources and technology. Producing more of one good typically means producing less of another, illustrating opportunity costs. The collection of all these combinations forms a curve called the Production Possibility Frontier (PPF). This concept helps to understand trade-offs, efficiency, and opportunity costs involved in making decisions about resource allocation.