ECON2003[1] - Economics200304:Section1:IntroductionPage1...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 2003-04: Section 1: Introduction  Page 1 SECTION 1: INTRODUCTION FOUNDATION OF ECONOMICS Scarcity Scarcity: although output is limited by the technology available, there may be  enough resources to satisfy basic needs for most humans, but there will never be  enough resources to satisfy all peoples wants and desires. What goods and services should be produced with the resources available? How can factors of production be used efficiently to produce what is chosen? For whom should these goods and services be produced? Factors of production include:  Land or Natural Resources: not man made: land, minerals, wood, fish. Labour: human resources determined by population, age, skill and training. Capital: man made tools such as buildings, equipment, and machinery Entrepreneurship: undertake the risk of organizing and combining factors for  production. Opportunity cost: the cost of using a resource measured in terms of the sacrifice  foregone in the next best alternative.  When the best alternative is chosen from a  range of alternatives the second best choice is the opportunity cost. Production Possibility Curve or Frontier Point B on the PPF shows the maximum that can be  produced with existing resources and technology, it is  a point of productive efficiency. The negative slope of the PPF reflects basic scarcity The law of diminishing returns implies a convex PPF:  as resources are transferred from one use to another,  the increment in output becomes smaller, the opportunity cost larger.  Resources are being released in the wrong combination The resources being released are less and less suited to the new use Point A inside the frontier is productively inefficient: more of one good could be  produced without sacrificing any of the other: Under market systems it is called unemployment Under central planning it is called inefficiency. Point C can only be reached through:  Trade The discovery of more resources Increased labour productivity from greater education and training Production Possibility Frontier Clothing Oranges A B C
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Page 2  Economics 2003-04: Section 1: Introduction Increased capital productivity from an increase in technological knowledge.
Background image of page 2
Economics 2003-04: Section 1: Introduction  Page 3 Populations were fairly limited until the agricultural revolution and hunter gatherers  were forced to do everything for themselves. Once agriculture developed people were able to specialize in the things they were 
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/26/2010 for the course ECONOMICS EC120 taught by Professor P.sinclair during the Spring '10 term at Wilfred Laurier University .

Page1 / 14

ECON2003[1] - Economics200304:Section1:IntroductionPage1...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online