ch02_condensed

ch02_condensed - Micro 101, Chapter 2 1 Chapter 2...

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Micro 101, Chapter 2 1 Chapter 2 Objectives : 1. Understand concept of opportunity cost 2. Construct a production possibilities frontier (PPF) a. A production inefficiency @ b. A law of increasing opportunity cost @ 3. Understand advantages of specialization & exchange 4. Define A absolute advantage @ and A comparative advantage @ 5. Understand different types of economic systems _______________________________________: (1) (2) (3) $ ______________________________ (a) (b)
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Micro 101, Chapter 2 2 Economics is the study of how ___________________ $ $ $ $ $ Opportunity cost (O.C.) and society $ consider economy with given number of people; fixed ________, _______, natural resources, etc. $ given economic resources (_____, _____, ______) how do we allocate into production of goods and services? $ pretend only two goods: guns and butter
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Micro 101, Chapter 2 3 Production Possibilities (like a menu): Possibility Butter Guns A 0 B 1 C 2 D 3 E 4 5 F 5 0 PPF for Guns and Butter 0 5 10 15 20 0246 Butter Guns $ want to be on the PPF A productive inefficiency @ if inside $ |slope| is the O.C. of another unit of butter $ law of A increasing O.C. @ -when reallocating production to another good, first shift resources __________ to that good (e.g., land used for production of either crops or oil)
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This note was uploaded on 03/26/2008 for the course ECON 101 taught by Professor Brentkreider during the Spring '07 term at Iowa State.

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ch02_condensed - Micro 101, Chapter 2 1 Chapter 2...

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