If you search Production Possibility Curves, you’ll get charts trading off product pairs such as wheat and steel, pizza and sugar, or guns and roses.  There are at least 3 problems here.  First, these charts are uniformly hypothetical.  Second, these trades involve disparate markets.  Most firms don’t play across the markets selected.  US Steel doesn’t harvest wheat.  Domino’s doesn’t compete with C&H Sugar.  Smith and Wesson don’t sell in flower auctions.  Third, producers don’t need conjecture but want the specific tradeoffs in their industries.

We can instead derive actionable production possibility curves based on real data.  As shown for the 2018 electric car market in A below, a curved surface describes how the market values horsepower and seat count.  As we set three price targets as horizontal planes, they intersect the curved surface as curved lines, as shown in B.  Those lines overlay open spaces in the market, revealing product feature pairs with economic distance between them and existing models.  In 2018, with horsepower as the first feature and seats as the second, new models with (255, 6) or (331,4) at $60K, or one with (647,6) at $100K find themselves in open market space.

#productionpossibilitycurve #trading #markets #prices