Leisure and the Production Possibility Frontier: A Two

The production possibility frontier (PPF) is a workhorse of economics principles texts, providing useful insights. However, its assumption of a given amount of labor can confuse students, who know that their willingness to supply labor is a variable, not given. That is, some will realize that there are actually many potential guns-butter trade-offs, one for each level of leisure chosen. That unexamined issue can undermine student buy-in to the concepts, and with it, the usefulness of the PPF and economic tools related to it and its “fixed amount of resources” assumption, such as the supply curves of microeconomics and the long-run aggregate supply curve of macroeconomics. However, that difficulty can be addressed using a two-step PPF presentation, which considers the simultaneous goods-leisure decision and the guns-butter possibilities consistent with it. It clarifies the analysis, as well as offering several benefits for economic instruction. JEL Classifications: A20, A2