Principles of Microeconomics / Unit 1 MIC 0027 worked example, 60 to 90 seconds
On, Inside or Outside the Frontier
The idea
Given a frontier and a point, answer three questions in order. Is the point attainable? Points on or inside the curve are; points outside are not, with the resources and technology in hand. Is it efficient? Only points on the curve are productively efficient; a point inside leaves resources idle or badly used, so more of both goods could be had. And what would move it? Ending the inefficiency moves a point from inside onto the curve, while growth moves the curve itself outward and brings formerly unattainable points within reach.
In practice
Worked example: a country can produce, at the extremes, forty thousand tons of grain and no bicycles, or twenty thousand bicycles and no grain, with a bowed curve between. A plan for twenty thousand tons and eight thousand bicycles lies inside: attainable, and inefficient, because both could rise. A plan for thirty-five thousand tons and eighteen thousand bicycles lies outside: not attainable now, though growth could bring it within reach.
Where people slip
The common error is to treat unattainable as impossible forever: a point outside the frontier is out of reach with today's resources, and growth can move the frontier past it. The second error is to call an inside point a choice about priorities. From inside there is no tradeoff: more of both goods is available, and moving to the frontier puts idle resources to work.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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