Chapter 2 - ECON 004 Principles of Economics Chapter 2 No...

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1 ECON 004 Principles of Economics Chapter 2 No Free Lunch • All decisions have benefits and costs. • Wants are unlimited • Trade offs ECON 004 Principles of Economics Opportunity Costs • Opportunity cost of any choice – What we must forego when we make that choice ECON 004 Principles of Economics Opportunity Costs • The opportunity cost of a choice includes – Explicit cost – Implicit cost • Arises from the scarcity of time or money • Time is money
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2 ECON 004 Principles of Economics Production Possibilities Frontiers • To produce more of one thing, have to give up something else. • Production Possibilities Frontier (PPF) ECON 004 Principles of Economics Figure 2 The Production Possibilities Frontier Number of Tanks per Year Bushels of Wheat per Year 1,000 2,000 3,000 4,000 5,000 1,000,000 950,000 850,000 700,000 400,000 B A C D E F W all resources are used for wheat Moving from point A to point B requires shifting resources out of wheat and into tanks all resources are used for tanks ECON 004 Principles of Economics Number of Consumer Goods Produced Per Period Number of Lives Saved Per Period A C B
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3 ECON 004 Principles of Economics Opportunity Cost
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Chapter 2 - ECON 004 Principles of Economics Chapter 2 No...

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