
Production Possibility Frontier or PPF captures only part of economic efficiency, namely efficiency in production. This efficiency involves only two of the three decision tasks: optimal allocation of scarce resources and optimal choice of technology. It is defined similarly as Pareto efficiency:  


 

The PPF of this example was calculated from a simple mathematical model with the so called CobbDouglas production functions of the form:
^{It was assumed, that the production functions for both bread and cloth have the same form, however with different numerical values of parameters.} 
^{The variables were}
^{parameters were}
 
It was also assumed that total quantities of labor and capital were 
^{In the following table subscripts b and c indicate bread and cloth.} 



