Among other things, economics is concerned with how societies, firms, and even individuals allocate resources to produce a mix of goods and services. A first step in this analysis is finding a way to express the choices that are available. In other words, we need a way to think about what goods and services can be produced before we consider the decision making process that determines what is actually produced.

We use a particular kind of graph called a Production Possibilities Frontier to show the output choices available when all productive resources are used efficiently and fully. (We'll be using the abbreviation PPF for the term Production Possibilities Frontier throughout this section.) A PPF can be used to represent the production possibilities facing an individual, a company, or a country. As we know, any decision, choice, or action involves trade-offs. PPFs are an ideal way to examine the trade-offs faced in making resource allocation decisions of the sort faced daily by countries and societies, firms and individuals, and even yourself.

We'll begin with an example that is probably close to your heart, the trade-off between leisure activities and grades. Of course, if you're at one of the traditional "party schools" this may not be a great concern. After all, that's the appeal of a party school. However, if you were at a party school you probably wouldn't be reading this, you'd be partying.

While not all students are created equal, most students find that they face these trade-offs. If too much time is spent in non-academic activities, grades suffer. If too much time is spent in academic activities, social life (fun) suffers. We'll examine this trade-off graphically on the next several pages.