CH 3 - -opportunity cost is always rising because resources...

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CH 3 Production Possibilities Frontier (PPF) -shows boundary between those combinations of goods and services that can be produced of what can be produced and those that cannot be produced good-x & good-y -Curvilinear (changing slope, changing relationship between good x and y) -Negative/inverse slope relationship between good x and good y -Attainable (inside frontier (PPF) are doable but not efficient)vs. unattainable (outside is unattainable) -efficiency vs. inefficient- inside ark is attainable but now always the most efficient)/outside is unattainable/ on the slope line is BEST (most efficient) -Trade off/quantity of trade off -Free lunch- moving from an efficient point to an inefficient point (backwards) -as you move down the slope toward x=0 the bigger the trade off -flatter slope- less trade off/steeper the slope- more/greater trade off -opportunity costs- rise the more of something you do and always rising when you’re producing if cost is linear
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Unformatted text preview: -opportunity cost is always rising because resources are not equally productive in all uses equation of opportunity cost= # units given up (forgone)/# units gained= cost per unit Cost of something=gained good-as you move up the curve, costs get more expensive Guns vs. Butter-Guns (defence)/Butter (Softer side of life) Economic Growth- in order to get economic growth, you have to give up what you have now X=consumer goods y= capital good-PPF overtime has ability to shift (economic growth) Trade Comparative advantage ability to produce goods at a lower cost than any other producer-absolute advantage- when one producer is more productive than another in several or all activities-specialization- produce only the good in which you have comparative advantage/do what you do well and trade-trade- mutually beneficial activity that expands consumption possibilities, not production possibilities...
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CH 3 - -opportunity cost is always rising because resources...

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