EFN 422 - Lecture 2 - EFN 422 Lecture 2 Economics and Data...

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EFN 422 – Lecture 2 Economics and Data Analysis
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Production Examples of economic production
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Production Examples of economic production
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Production Stuff 1 Stuff N Stuff j New stuff Production process (“Technology ”)
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Production Fruit Bowl Jam Production process (“Technology ”)
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Production Labour Capital Good Production process (“Technology ”)
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But w hy produce? Inputs in the production process are lost They are valuable Example 1: fruit can be consumed Example 2: labour implies a reduction of leisure (finite amount of time in the day) Producing is costly This cost has to be compared with the gains from production Selling produced goods to other consumers and get an income out of it
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Econom ics – the science of trade-off s This is a perfect example of the main question economics helps to solve How to allocate scarce resources to competing use in order to meet some goals. Example 1: How to allocate fruits (consumption or production) to maximise the producer satisfaction. Example 2: How to allocate hours of the day (work or leisure) to maximise the producer’s satisfaction. Such choices are not trivial: they present trade-offs Pros and cons have to be assessed to see what is the best decision
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O pportunity cost Opportunity cost is a key concept in economics It embodies the idea of trade-offs: Valuable resources (money, goods, time) can have different use
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