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Unformatted text preview: rkets fail to allocate resources efficiently ? Main Questions i.e. can we improve upon the market outcome to make some people better off without making anybody worse off?
Class 1 1/7/2009 6 The Economic Problem How best to allocate scarce resources while trying to satisfy limitless wants?
What to produce? How to produce? For whom to produce? Turn first to production issues What does efficiency imply about allocation of productive resources?
Class 1 7 1/7/2009 Production Possibilities Frontier
Simple model demonstrating some implications of the scarcity of productive resources Production is the process of transforming factors of production (inputs) into goods and services (outputs) Scarcity of factors of production limits the quantities of various outputs that can be produced
Class 1 8 1/7/2009 Production Possibilities Frontier Assume The production decision reveals a tradeoff: Two goods can be produced Production of these goods requires at least some common inputs The common inputs are limited in supply (i.e. are scarce) If all productive resources are employed, then increasing output of one good implies that output of the other good will fall.
Class 1 1/7/2009 9 iPhones A All resources used to produce iPhones Production Possibilit...
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