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Unformatted text preview: Microeconomics: Scarcity and Production 31/08/2007 14:30:00 ← Production: process by which resources are transformed into useful forms ← Resources or Inputs: anything that can be used to satisfy human wants. • Ex. Physical capital, human and natural resources. ← Production Possibilities Frontier: • A graph that summarizes the various production combinations with a fixed supply of inputs if resources are used efficiently • Tradeoff: To produce more of one good, you must produce less of the other good. o The slope of these graphs are negative, indicating a tradeoff. • To determine the opportunity costs of producing on more pound of cheese? Calculate the slope of the graph! • Slope is calculated by (Y1-Y2)/(X1-X2) • To interpret a slope of for example -2 when wine and cheese are the possibilities. To increase 1 pound of cheese, you have to give up 2 gallons of possibilities....
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This note was uploaded on 03/20/2008 for the course ECON 2306 taught by Professor Cloud during the Fall '07 term at UGA.
- Fall '07