Chapter_2 - ECON1000: IntroductiontoMicroeconomics...

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ECON 1000: Introduction to Microeconomics Professor Sudeshna Maitra Course Website http://dept.econ.yorku.ca/~smaitra/Econ1000_A.htm   http://dept.econ.yorku.ca/~smaitra/Econ1000_D.htm  Please come forward and collect a copy of the course       outline. ..  Please silence your mobile phones… 
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  http://dept.econ.yorku.ca/~smaitra/Econ1000_A  http://dept.econ.yorku.ca/~smaitra/E 2 Chp. 1: Review Economics is the study of choice , scarcity  and  incentives Key concepts: Tradeoffs , Opportunity Cost , Choice at  the Margin , Incentives 2 important issues: What to produce, how to produce and for whom to produce Self-interest vs. Social interest
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  http://dept.econ.yorku.ca/~smaitra/Econ1000_A  http://dept.econ.yorku.ca/~smaitra/E 3 Today’s Lecture: Chp. 2 The Economic Problem Production Possibility Frontier (PPF) Efficient allocation Economic growth Trade
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  http://dept.econ.yorku.ca/~smaitra/Econ1000_A  http://dept.econ.yorku.ca/~smaitra/E 4 Neoclassical Theory Addresses the question: How do individuals make  choices among scarce resources? Important concepts: Opportunity cost Production Possibility Frontier Opportunity cost is highest-valued alternative forgone
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http://dept.econ.yorku.ca/~smaitra/Eco Attainable 0 2 8 10 Beer Pizza 2 4 6 8 4 1 3 5 7 9 10 6 a b c d e f Beer 10 8 6 4 2 0 Pizza 0 1 2 3 4 5 Unattainable Resources: $10 Prices: Beer $ 1 Pizza $ 2 Example of an individual with given resources ($10) making a consumption choice
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  http://dept.econ.yorku.ca/~smaitra/Econ1000_A  http://dept.econ.yorku.ca/~smaitra/E 6 Production Possibilities and Opportunity  Cost Production Possibility Frontier (PPF) The PPF is the boundary between unattainable  and  attainable   production  possibilities It shows the maximum possible combinations of  outputs   given resources and technology Note: example on previous page was for an individual; PPF  is for society as a whole
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http://dept.econ.yorku.ca/~smaitra/Eco Attainable Fig. 2.1 Production Possibility Frontier CDs Unattainable Pizza 0 1 2 3 4 5 5 10 15 a b d c f e z
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http://dept.econ.yorku.ca/~smaitra/Econ1000_A  http://dept.econ.yorku.ca/~smaitra/E 8 Production Possibility Frontier Characteristics of the PPF: points on PPF  represent production efficiency points inside PPF   are inefficient points on PPF are preferred to points inside points outside PPF  are unattainable
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Chapter_2 - ECON1000: IntroductiontoMicroeconomics...

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