What is the purpose of this purple dashed line area?

It shows the available space where text can be expanded.

You can see this dashed area after text which means it is area where text can be expanded.

Let me show an example with just one character:

And an example with more characters looks like this. It can be seen that length of purple dashed line area is decreased:

It is possible to run the following code snippent and open dev tools see this purple dashed area:

*, html, body {
    box-sizing: border-box;
    margin: 0;
}

div {
    position: relative;
    background-color: lightgreen;
}

button {
  display: flex;
  width: 100px;
}

<div>
    <button>1</button>
</div>