jan29th - 1/28/08 1) Production Possibilities Frontier a)...

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1/28/08 1) Production Possibilities Frontier a) In economics , a production possibilities frontier (PPF) or “transformation curve” is a graph that shows the different quantities of two goods that an economy (or agent ) could efficiently produce with limited productive resources . Points along the curve describe the trade-off between the two goods, that is, the opportunity cost. Opportunity cost here measures how much an additional unit of one good costs in units forgone of the other good. The curve illustrates that increasing production of one good reduces maximum production of the other good as resources are transferred away from the other good. 2) Efficiency a) In Economics efficiency is a general term encompassing the idea that a system proceeds with the minimum amount of waste. Efficiency is improved if the amount of "waste" or "friction" is reduced. The efficiency of an economy is used to determine how well an economic system serves society .
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This note was uploaded on 03/31/2008 for the course ECON 101 taught by Professor Hansen during the Spring '07 term at Wisconsin.

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jan29th - 1/28/08 1) Production Possibilities Frontier a)...

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