What is a production possibility frontier?

A production possibility frontier, or PPF, is a line showing the maximum level of output in an economy of one good or group of goods in terms of another. At any point on this line, the economy is operating at full capacity and resources are being used to their greatest potential. Any point inside the PPF displays poor use of resources and economic ineficiency. It is not possible to operate outside the PPF, although it can shift outwards due to other factors such as technological advancements or population growth. Movements along the PPF occur due to changes in the combinations of goods being produced, showing opportunity costs.