Class01_09

Class01_09 - Class Notes(cover part of Chapter 2 in the...

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Class Notes (cover part of Chapter 2 in the textbook) Class Outline Production Possibilities and Opportunity Cost Using Resources Efficiently Economic Growth Production Possibilities and Opportunity Cost The quantities of goods and services we can produce are limited by our available resources and by technology. In order to increase the production of a good we must decrease the production of something else, i.e. we face tradeoffs. Def. Tradeoff A tradeoff is an exchange - giving up one thing in order to get something else. Def. Production Possibilities Frontier (PPF) The Production Possibility Frontier is the boundary between those combinations of goods and services that can be produced and those that cannot. Focus on two goods : Beers and Donuts, and hold the production of all other goods and services constant . The PPF for Beers and Donuts shows the limits to the production of these two goods, given the total resources available to produce them. 1
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Class01_09 - Class Notes(cover part of Chapter 2 in the...

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