econ notes - 6/30,7/1 Economic Problem 2008-06-30 1. What...

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6/30,7/1 Economic Problem 2008-06-30 1. What – What will be produced and in what quantities? 2. How – How will it be produced? 3.Who – Who will get the goods produced? Ways societies answer these questions; 1. Tradition – whatever the question was answered last time, it will be answered this time 2. Command – Gov’t planners answer the questions and then create plans to implement their answers. Example= former soviet union, north korea, cuba Govt planners social interest Plans producers self interest 3. Markets, (relative) prices, property rights – Market- any mechanism that allows buyers and sellers to transact their business
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Money price- price of a product expressed in terms of money Relative price- the money price of a product expressed relative to the money price of another product Property rights- socially determined laws or regulations that govern the use and disposal of property (property anything you can own)
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Production Possibilities Frontier 2008-06-30 Resources
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6/30,7/1 Economic Problem 2008-06-30 1. Labor 2. Capital 3. Land 4. Entrepreneurship To find opportunity cost divide loss by gain Possibility Machines Gumballs opportunity cost of a gumball A 10 0 loss: 1 M gain:1 GB opp cost: 1 M/GB B 9 1 loss:2 M gain:1 GB opp cost: 2 M/GB C 7 2 loss:3 M gain:1 GB opp cost 3 M/GB D 4 3 loss:4 M gain:1 GB opp cost: 4 M/GB E 0 4 Production Possibilities Frontier 10 Not attainable not efficient
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6/30,7/1 Economic Problem 2008-06-30 Gum 0 1 2 3 4 Law of increasing opportunity cost- moving along the PPF as more of a good/service is produced the opportunity cost of an additional unit increases Limiting factors: Resources Technology 1. The production possibilities frontier, PPF , shows the maximum production points. 2. Production within the production possibilities frontier is possible, but producing at a point within the frontier is the result of unemployment of resources or some other type of inefficiency. Hence, production points within the PPF are attainable but inefficient .
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This note was uploaded on 07/16/2008 for the course ECO 2023 taught by Professor Rush during the Summer '08 term at University of Florida.

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econ notes - 6/30,7/1 Economic Problem 2008-06-30 1. What...

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