There are three assumptions of the production possibilities frontier. Which are:
- That the resources are finite: The three major factors of production in production possibilities frontier are land labor and capital. This assumption just points out the reality that to any production system, the resources available will be limited. Some firms can afford more than the others but still they do have a certain point after which they also can’t get the resources.
- That the use of resources is full and efficient. This means that there is a trade off involved in the production. To increase the production of one product, you will have to decrease the production of the other goods.
- That the best available technology is used. This means that at any given point in time, the producers will use the best technology to make efficient use of the limited resources.