Three possible Food-Housing combinations    As we noted in our GPA/Leisure trade-off example, we have no way of saying what the society faced with the PPF to the right should do. Another way of saying this is that, simply based on the PPF, we don't know the societies needs or preferences.19 Many beginning students will suggest that point B is the best since it appears to be a sort of midpoint. Unfortunately, the fact that B appears to be near the middle has no practical meaning. Keep in mind that we have not even defined the meaning of a "unit" of food or housing for this graph.

   Suppose that this is a country with a very harsh climate. Such a country might prefer a point like A where most resources are devoted to housing. A country with a very mild climate but populated with gourmets, might prefer a point like C, where housing production is modest but food production is very high. Based on this PPF, we have no accepted economic criteria for saying what a country facing these trade-offs should, or would want to, do.

19 In Chapter 4. Consumer Choice we will consider how to work with representations of preferences, but this does not change the fact that based a PPF provides no information about preferences, tastes or needs.

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