SI - Week 2 (Combined PPC + Supply-Demand Intro) S11

SI - Week 2 (Combined PPC + Supply-Demand Intro) S11 - UT...

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UT Supplemental Instruction Program ECO 304K Principles of Microeconomics Week 2: Combined PPC + Supply & Demand Intro Q P SI Leader: Juan Salem Email: [email protected] Important Ideas: 1. Only when an economy is on its PPC is it being efficient. If the only way to produce more of one good is to produce less of another, then the econ- omy is producing effi- ciently. 2. Growth allows an econ- omy to have more of eve- rything. The main ways to have growth are to invest more, innovate, increase specialization, and in- crease inputs. 3. The points inside the PPC are attainable by society but are inefficient since with its resources, the economy could have more of both goods. The points outside the PPC are unattainable. Formulas 1. To calculate the slope of a line between two points simply divide the change in the y-axis by the change in the x-axis (Rise over Run). PPC for multi-person economy Question: Susan can gather 2 pounds of nuts or pick 4 pounds of coffee per hour while Tom can gather 4 pounds of nuts or pick 2 pounds of coffee per hour. Suppose they each work 6 hours a day. A) Draw the production possibilities curve for both Tom and Susan on the graph below. (graph coffee on the x-axis) Tom’s PPC slope: ________ Susan’s PPC slope: ________ B) Susan has a comparative advantage in ( coffee / nuts) and Tom has a comparative advantage in ( coffee / nuts) . We can see this on the graph because the slope of Susan’s PPC is (
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This note was uploaded on 09/13/2011 for the course ECON 898 taught by Professor White during the Spring '11 term at University of Texas.

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SI - Week 2 (Combined PPC + Supply-Demand Intro) S11 - UT...

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