Lecture 4 - ECON 101 Lecture 4 What do you need to produce...

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ECON 101 1/21/09 Lecture 4 What do you need to produce more cars? More people & resources (more inputs) Let’s say we hire 100 more workers for roadsters and 100 for SUVs. How do you represent a situation where you hire more workers or get more machines on a PPF? This shifts the PPF line up (for more products) What do PPF straight lines imply? The workers all have the same skill set What if there were variations in skill sets? The PPF would be bowed out What if you hire 200 SUV workers but no one for roadsters? PPF line goes up for SUV but stays the same for Roadsters (change in slope) Every time we change the slope of a line, we change the opportunity cost. This idea of shift/rotating curve is called economic growth. Economic growth – sustained expansion of production possibilities Economic contraction – the sustained decline of production possibilities (aka firing employees) Consider now two types of goods: Cell phones (consumer goods) Cell phone factories (capital goods)
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