Econ25200F10Mtg3

Econ25200F10Mtg3 - Econ 25200 3rd Class Hubbard OBrien Chap...

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Econ 25200 – 3 rd Class
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Hubbard & O’Brien Chap. 2 Scarcity & Production Possibility Frontiers Trade-offs Absolute advantage, comparative advantage Markets –circular flow Markets – property rights
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Scarcity Money, time Individual, group, national, global Implications – face choices, trade-offs Social contagion – a possible exception?
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Production Possibility Frontier Stylized version of scarcity, usually at national level Boundary of achievable production options at given point of time Abbreviation: PPF
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Ceteris paribus “With other things being equal” Captures what is being held constant in background WARNING: ceteris paribus conditions in science are rarely exhaustive
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Ceteris paribus for PPF Given technology Technology = means of transforming inputs into outputs Given national endowments of factors of production Factors of production = inputs such as land, labor, capital
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Implication Changing technology or changing quantity of factor(s) of production shifts PPF With given technology and quantity of factors of production, can only move along or within given PPF.
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Long-run Debate Exhaustible resources, finite land and perhaps sustainability issues VERSUS Technology as panacea that will alleviate, eliminate all such problems
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Attainable versus unattainable Quantity of Wheat Points on or inside PPF are attainable Points outside PPF are unattainable Quantity of Grapes . A . C .
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