Lecture2 - Lecture 2 Resources – society should use all...

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Unformatted text preview: Lecture 2 Resources – society should use all outpout-it is inefficient not to do so-more output makes people happier (increases society’s utility)-resources can be considered lifetime resources, not just resources available now Full employment-when all resources are being used in production-necessary for efficiency Recessions occur when there is not full employment Resource allocation-How should we allocate resources to production?-What is the efficient method? Class ex. 2 goods: bananas and potatoes How should we allocate resources (people/time/labor)? How do we come to this solution? How do we know this is efficient? Specialization-each resource concentrates in producing only one output (rather than switching between producing different types of output) Gains to specializing-time saved from switching activities-become skilled in one task Specialization is necessary for efficiency Ex. 2 resources: time/labor of Prometheus and time/labor of Bob Assume Prometheus and Bob have 12 hours each Let there be two goods: technology and food Prometheus can produce 20 technology/hour or 10 food/hour...
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Lecture2 - Lecture 2 Resources – society should use all...

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