Economics @ ITT

How to Graph a Production Possibilities Frontier in Excel 2003

Posted in economics, microeconomics by ittecon on March 12, 2010

Here is a step-by-step tutorial showing how to create a Production Possibilities Frontier (Curve) in Excel 2003. The concept carries forward to creating a PPC in Excel 2007, too.

If you are reading this, I presume you know what a PPC is; you just want to know how to chart it. For those who somehow just stumbled here, I provide a concise definition.

A Production Possibilities Frontier is a graphical depiction of opportunity costs; given two competing possibilities, you must choose how you wish to allocate resources to make a determination of output, but as you move to increase one item, you must trade off some amount of the other item. The maximum (optimally efficient) production possibilities are captured by the (typically) concave curve, beyond which you do not have the resources to acheive and inside the curve. The actual combination of outputs depends on preferences, a decision beyond the scope of this example.

Open a blank Excel worksheet, and enter your data in separate columns for the two possibilities. Feel free to name the data in the top row. Note that one of your columns needs to be in ascending order, whilst the other needs to be in descending order. You may enter as few as 2 data points per item and as many as Excel allows. When you are done, highlight the data range, and invoke the Chart Wizard.

Using the Chart Wizard, choose the XY (Scatter) chart type and select one of the charts with lines. Click Next when you are ready.

Excel Chart Wizard - Scatter

Though it is not necessary, you may change the name of your data series. As for me, I delete the legend for my final chart when I only have one factor of production. Click Next when you are ready.

Excel Chart Wizard - Series Name

Here is where you can name your axes. Other tabs provide additional formatting capabilities. If you wish, all of this can be done after your chart is rendered. Click Next when you are ready.

Excel Chart Wizard - Label Axes

Now, you can choose whether to embed the chart or create a separate chart page. I chose to embed it. Click Finish, and you can enjoy the fruits of your labour.

Excel Chart Wizard - Save

Finished PPC Chart

I hope this helps. I will be posting how to chart opportunity costs related to comparative advantage soon.

6 Responses

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  1. Wesley Callan said, on March 13, 2010 at 6:02 am

    This is a great blog you got here but i can’t seem to find the RSS button.

  2. […] } A few days ago I create a post named How to Graph a Production Possibilities Frontier in Excel 2003, and I thought it might be helpful to demonstrate the difference regarding How to Graph a […]

  3. Yolanda said, on March 16, 2012 at 10:32 am

    This just doesn’t work for the problem i’m doing. Could that be becasue I don’t have enough numbers

    Porduction per worker per year Production per 100M workers per year
    Cars Grain (tons) Cars Grain (tons)
    America 4 10 400,000,000 1,000,000,000.00
    Japan 4 5 400,000,000 500,000,000.00

  4. Cedric said, on July 18, 2013 at 2:49 am

    Doesn’t it happen that the curve goes to not possible

  5. kasskad said, on August 30, 2013 at 3:47 am

    Production Possibilities for a Nation

  6. […] response to my post on How to Graph a Production Possibilities Frontier in Excel 2007 and Excel 2003, several people have asked how to chart two production possibilities curves, so I have created the […]

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