The first principle of economics discussed inChapter 1 is that people face tradeoffs. Use a
production possibilities frontier to illustrate society's tradeoff between a clean environment and
the quantity of industrial output. What do you suppose determines the shape and position of the
frontier? Show what happens to the frontier ifengineers develop an automobile engine with
almost no emissions
See Figure 2. The shape and position of the frontier depend on how costly it is to maintain a clean
environment⎯the productivity of the environmental industry. Gains in environmental productivity, such as the
development of a no-emission auto engine, lead to shifts of the production-possibilities frontier, like the shift from
PPF1to PPF2shown in the figure.